CUBIC CORP /DE/ (Form: 10-Q, Received: 02/11/2013 16:03:40)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarter Ended December 31, 2012

001-08931

Commission File Number

CUBIC CORPORATION

Exact Name of Registrant as Specified in its Charter

Delaware		95-1678055
State of Incorporation		IRS Employer Identification No.

9333 Balboa Avenue

San Diego, California 92123

Telephone (858) 277-6780

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).

Large accelerated filer x	Accelerated filer ¨

Non-accelerated filer o	Small Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-b-2 of the Exchange Act). Yes o No x

As of January 24, 2013, registrant had only one class of common stock of which there were 26,736,307 shares outstanding (after deducting 8,945,300 shares held as treasury stock).

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CUBIC CORPORATION

QUARTERLY REPORT ON FORM 10-Q

For the Quarter Ended December 31, 2012

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		Page

PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	2
	Condensed Consolidated Statements of Income	2
	Condensed Consolidated Statements of Comprehensive Income	3
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to the Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	29
Item 4.	Controls and Procedures	29

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 6.	Exhibits	50

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PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

CUBIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(amounts in thousands, except per share data)

	Three Months Ended
	December 31,
	2012			2011

Net sales:
Products	$	135,701		$	153,310
Services	177,670			163,456
	313,371			316,766

Costs and expenses:
Products	100,895			113,449
Services	143,851			131,408
Selling, general and administrative	40,997			35,220
Research and development	5,822			4,896
Amortization of purchased intangibles	3,564			4,039
	295,129			289,012

Operating income	18,242			27,754

Other income (expense):
Interest and dividend income	437			762
Interest expense	(862		)	(347		)
Other income (expense) - net	102			923

Income before income taxes	17,919			29,092

Income taxes	5,400			8,353

Net income	12,519			20,739

Less noncontrolling interest in income of VIE	73			45

Net income attributable to Cubic	$	12,446		$	20,694

Basic and diluted net income per common share	$	0.47		$	0.77

Average number of common shares outstanding	26,736			26,736

See accompanying notes.

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CUBIC CORPORATION

CONDENSED CONSOLIDATED

STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)

	Three Months Ended
	December 31,
	2012		2011

Net income	$	12,519	$	20,739
Other comprehensive income (loss):
Foreign currency translation	1,295		347
Net unrealized gain (loss) from cash flow hedges	742		(1,160		)
Total other comprehensive income (loss)	2,037		(813		)
Total comprehensive income	$	14,556	$	19,926

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CUBIC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

	December 31,			September 30,
	2012 (Unaudited)			2012 (See note below)
ASSETS
Current assets:
Cash and cash equivalents	$	174,116		$	212,267
Restricted cash	68,829			68,749
Accounts receivable - net	359,301			350,697
Recoverable income taxes	4,817			7,083
Inventories - net	53,095			52,366
Deferred income taxes and other current assets	24,243			21,564
Total current assets	684,401			712,726

Long-term contract receivables	21,460			22,070
Long-term capitalized contract costs	40,146			26,875
Property, plant and equipment - net	55,434			55,327
Goodwill	173,734			146,933
Purchased intangibles - net	54,188			39,374
Other assets	21,390			23,012
	$	1,050,753		$	1,026,317

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings	$	25,000		$	—
Trade accounts payable	29,001			47,917
Customer advances	107,913			100,764
Accrued compensation and other current liabilities	122,316			108,668
Income taxes payable	8,715			20,733
Current portion of long-term debt	4,563			4,561
Total current liabilities	297,508			282,643

Long-term debt	2,814			6,942
Other long-term liabilities	65,533			66,390

Shareholders’ equity:
Common stock	12,574			12,574
Retained earnings	727,489			715,043
Accumulated other comprehensive loss	(19,111		)	(21,148		)
Treasury stock at cost	(36,078		)	(36,078		)
Shareholders’ equity related to Cubic	684,874			670,391
Noncontrolling interest in variable interest entity	24			(49		)
Total shareholders’ equity	684,898			670,342
	$	1,050,753		$	1,026,317

Note: The Balance Sheet at September 30, 2012 has been derived from the audited financial statements at that date.

See accompanying notes.

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CUBIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

	Three Months Ended
	December 31,
	2012			2011
Operating Activities:
Net income	$	12,519		$	20,739
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	4,718			5,832
Changes in operating assets and liabilities	(43,353		)	(64,948		)
NET CASH USED IN OPERATING ACTIVITIES	(26,116		)	(38,377		)

Investing Activities:
Acquisition of businesses, net of cash acquired	(33,095		)	—
Purchases of property, plant and equipment	(1,423		)	(5,249		)
Proceeds from sales or maturities of short-term investments	—			6,957
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	(34,518		)	1,708

Financing Activities:
Proceeds from short-term borrowings	25,000			—
Principal payments on long-term debt	(4,140		)	(4,136		)
Net change in restricted cash	229			—
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	21,089			(4,136		)

Effect of exchange rates on cash	1,394			798

NET DECREASE IN CASH AND CASH EQUIVALENTS	(38,151		)	(40,007		)

Cash and cash equivalents at the beginning of the period	212,267			329,148

CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD	$	174,116		$	289,141

Supplemental disclosure of non-cash operating and investing activities:

Liability incurred to acquire NEK	$	20,130		$	—

See accompanying notes.

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CUBIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

December 31, 2012

Note 1 — Basis for Presentation

Cubic Corporation (“we”, “us”, and “Cubic”) has prepared the accompanying unaudited condensed consolidated financial statements in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

In our opinion, all adjustments necessary for a fair presentation of these financial statements have been included, and are of a normal and recurring nature. Operating results for the three month period ended December 31, 2012 are not necessarily indicative of the results that may be expected for the year ending September 30, 2013. For further information, refer to the consolidated financial statements and footnotes thereto included in our annual report on Form 10-K for the year ended September 30, 2012.

The preparation of the financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Note 2 — Acquisition

NEK

On December 14, 2012, Cubic acquired from NEK Advanced Securities Group, Inc. (Seller) the customer contracts and operating assets of NEK Special Programs Group LLC (NEK), which consists of the Seller’s Special Operation Forces training business based in Fayetteville, North Carolina and Colorado Springs, Colorado. This acquisition will expand the scope of services and customer base of our Mission Support Services (MSS) segment. In connection with the acquisition, we hired more than 200 employees of the Seller’s Special Operations Forces training business. This transaction has been accounted for as a business combination. The results of the acquired operations have been included in our condensed consolidated financial statements since the acquisition date and were not material to our consolidated results of operations for the three months ended December 31, 2012.

The acquisition agreement states that the cost of the acquisition will total $52.0 million, adjusted by the difference between the net working capital acquired and targeted working capital amounts, less amounts that will not be due if certain future events fail to occur. The acquisition-date fair value of consideration transferred is estimated to be $53.2 million. In December 2012, we paid cash of $33.1 million and recorded a current liability of approximately $20.1 million as an estimate of additional cash consideration that will be due to the Seller. The timing of the payment of $8.4 million of the additional cash consideration will be accelerated if the Seller causes certain events to occur, but will ultimately be paid over the passage of time regardless of whether these

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events occur. Approximately $11.7 million of the additional cash consideration is contingent upon future events, including the novation of certain of the Seller’s contracts to NEK. We have estimated the fair value of the contingent consideration using a probability-weighted discounted cash flow model. We have estimated that the probability of payment of any amounts less than the maximum possible additional cash consideration of $11.7 million is remote, and we have estimated that the contingent consideration amounts will be paid within two to six months of the acquisition date. As such, we have estimated that the fair value of the additional cash consideration approximates the maximum possible contingent payments to the Seller of $11.7 million.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in millions):

Customer relationships	$	13.3
Corporate trade names	4.9
Non-compete agreements	0.2
Accounts receivable -billed	3.4
Accounts receivable -unbilled	7.7
Accounts payable	(2.7		)
Other net tangible assets acquired	(0.4		)
Net identifiable assets acquired	26.4
Goodwill	26.8
Net assets acquired	$	53.2

The estimated fair values of the assets acquired and liabilities assumed, including the fair value of purchased intangibles, are preliminary estimates pending the finalization of our valuation analyses. The estimated fair value of the accounts receivable and accounts payable will be finalized as further information is received from the Seller regarding these items.

The goodwill resulting from the acquisition consists primarily of the synergies expected from combining the operations of NEK and our MSS business and the acquired assembled workforce. The anticipated synergies include the ability to expand services offerings and cost reductions. The amount recorded as goodwill will be allocated to our MSS segment and is expected to be deductible for tax purposes. The intangible assets, which include trade names, customer relationships, and non-compete agreements, will be amortized using a combination of straight-line and accelerated methods based on the expected cash flows from the assets, over a weighted average useful life of four years from the date of acquisition.

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Based upon the preliminary estimate of the fair value of identifiable intangible assets, the estimated amortization expense related to the intangible assets recorded in connection with our acquisition of NEK for fiscal years 2013 through 2017 is as follows (in millions):

Year Ended September 30,
2013	$	3.0
2014	3.4
2015	2.9
2016	2.4
2017	1.9

The preliminary estimated fair values of purchased intangibles were determined using the valuation methodology deemed to be the most appropriate for each type of asset being valued. Each of the valuation methodologies used were various methods under the income approach. The trade names valuation used the relief from royalty approach. The customer relationships valuation used the excess earnings approach and the non-compete agreements valuation used the with and without approach.

The following unaudited pro forma information presents our consolidated results of operations as if NEK had been included in our consolidated results since October 1, 2011 (in millions):

	Three Months Ended
	December 31,
	2012		2011

Net sales	$	324.0	$	327.0

Net income attributable to Cubic	$	13.1	$	21.1

The pro forma information includes adjustments to give effect to pro forma events that are directly attributable to the acquisition and have a continuing impact including the amortization of purchased intangibles and the elimination of interest expense for the repayment of NEK debt. No adjustments were made for transaction expenses, other adjustments that do not reflect ongoing operations or for operating efficiencies or synergies. The pro forma financial information is not necessarily indicative of what the consolidated financial results of our operations would have been had the acquisition been completed on October 1, 2011, and it does not purport to project our future operating results.

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Note 3 — Balance Sheet Details

The components of accounts receivable are as follows (in thousands):

	December 31,			September 30,
	2012			2012

Trade and other receivables	$	19,701		$	17,543
Long-term contracts:
Billed	84,961			91,132
Unbilled	276,520			264,555
Allowance for doubtful accounts	(421		)	(463		)
Total accounts receivable	380,761			372,767
Less estimated amounts not currently due	(21,460		)	(22,070		)
Current accounts receivable	$	359,301		$	350,697

The amount classified as not currently due is an estimate of the amount of long-term contract accounts receivable that will not be collected within one year from December 31, 2012 under transportation systems contracts in the U.S. and Australia. The non-current balance at September 30, 2012 represented non-current amounts due from customers under transportation systems contracts in the same locations.

Inventories consist of the following (in thousands):

	December 31,			September 30,
	2012			2012
Work in process and inventoried costs under long-term contracts	$	85,411		$	78,796
Customer advances	(33,086		)	(27,288		)
Raw material and purchased parts	770			858
Net inventories	$	53,095		$	52,366

At December 31, 2012, work in process and inventoried costs under long-term contracts includes approximately $2.5 million in costs incurred outside the scope of work or in advance of a contract award, compared to $1.9 million at September 30, 2012. We believe it is probable that we will recover these costs, plus a profit margin, under contract change orders or awards within the next year.

Long-term capitalized contract costs include costs incurred on a contract to develop and manufacture a transportation fare system for a customer for which revenue will not begin to be recognized until the system has been delivered.

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Note 4 — Fair Value of Financial Instruments

We carry financial instruments including cash equivalents, accounts receivable, short-term borrowings, accounts payable and accrued liabilities at cost, which we believe approximates fair value because of the short-term maturity of these instruments. Receivables consist primarily of amounts due from U.S. and foreign governments for defense products and local government agencies for transportation systems. Due to the nature of our customers, we generally do not require collateral. We have limited exposure to credit risk as we have historically collected substantially all of our receivables from government agencies.

The valuation techniques required for fair value accounting are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. The two types of inputs create the following fair value hierarchy:

· Level 1 - Quoted prices for identical instruments in active markets.

· Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

· Level 3 - Significant inputs to the valuation model are unobservable.

The following table presents assets and liabilities measured and recorded at fair value on our Condensed Consolidated Balance Sheets on a recurring basis (in thousands). The fair value of cash equivalents approximates their cost. Derivative financial instruments related to foreign currency forward contracts are measured at fair value, the material portions of which are based on active or inactive markets for identical or similar instruments or model-derived valuations whose inputs are observable. Where model-derived valuations are appropriate, we use the applicable credit spread as the discount rate. Credit risk related to derivative financial instruments is considered minimal and is managed by requiring high credit standards for counterparties and through periodic settlements of positions. The fair value of our contingent consideration obligation to the Seller of NEK is revalued to its fair value each period and any recorded increase or decreases is recorded into selling, general and administrative expense. Any changes in the assumed timing and amount of the probability of payment scenarios could impact the fair value. We have estimated the fair value of the contingent consideration using a probability-weighted discounted cash flow model. We have estimated that the probability of payment of any amounts less than the maximum possible additional cash consideration of $11.7 million is remote, and we have estimated that the contingent consideration amounts will be due within two to six months of the acquisition date. As such, we have estimated that the fair value of the additional cash consideration approximates the maximum possible contingent payments to the Seller of $11.7 million. There was no change in the fair value of the contingent consideration between the date of the acquisition of NEK and December 31, 2012; therefore, no contingent consideration expense was recorded in the quarter. Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and each subsequent period. Accordingly, changes in the assumptions described above can materially impact the amount of contingent consideration expense we record in any period.

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	December 31, 2012
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	128,080	$	—	$	—	$	128,080
Current derivative assets	—		2,552		—		2,552
Noncurrent derivative assets	—		2,612		—		2,612
Total assets measured at fair value	$	128,080	$	5,164	$	—	$	133,244
Liabilities
Current derivative liabilities	$	—	$	5,564	$	—	$	5,564
Noncurrent derivative liabilities	—		4,304		—		4,304
Contingent consideration to Seller of NEK	—		—		11,684		11,684
Total liabilities measured at fair value	$	—	$	9,868	$	11,684	$	21,552

	September 30, 2012
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	171,300	$	—	$	—	$	171,300
Current derivative assets	—		3,779		—		3,779
Noncurrent derivative assets	—		3,713		—		3,713
Total assets measured at fair value	$	171,300	$	7,492	$	—	$	178,792
Liabilities
Current derivative liabilities	$	—	$	6,839	$	—	$	6,839
Noncurrent derivative liabilities	—		6,498		—		6,498
Total liabilities measured at fair value	$	—	$	13,337	$	—	$	13,337

Long-term debt is carried at amortized cost. The fair value of long-term debt is calculated by discounting the value of the note based on market interest rates for similar debt instruments, which is a Level 2 valuation technique. At December 31, 2012, the fair value of our long-term debt was estimated to be approximately $8.1 million compared to a carrying value of $7.4 million. At September 30, 2012, the fair value of our long-term debt was estimated to be approximately $12.5 million compared to a carrying value of $11.5 million.

Note 5 — Financing Arrangements

We have a committed revolving credit agreement with a group of financial institutions in the amount of $200.0 million, expiring in May 2017 (Revolving Credit Agreement). The available line of credit on the Revolving Credit Agreement is reduced by any letters of credit issued under the agreement. As of December 31, 2012, there were borrowings of $25.0 million outstanding under this agreement, of which $5.0 million was repaid in February 2013. Our borrowings under the Revolving Credit Agreement bear interest at a variable rate (1.6% at December 31, 2012). In addition, there were letters of credit outstanding under the Revolving Credit Agreement totaling $42.4 million, which reduce the available line of credit to $132.6 million.

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We have a secured letter of credit facility agreement with a bank (Secured Letter of Credit Facility) which expires in March 2013. At December 31, 2012 there were letters of credit outstanding under this agreement of $63.4 million. In support of the Secured Letter of Credit Facility, we placed $68.8 million of our cash on deposit in the U.K. as collateral in a restricted account with the bank providing the facility. We are required to leave the cash in the restricted account so long as the bank continues to maintain associated letters of credit under the facility. The maximum amount of letters of credit currently allowed by the facility is $66.8 million, and any increase above this amount would require bank approval and additional restricted funds to be placed on deposit. We may choose at any time to terminate the facility and move the associated letters of credit to another credit facility. Letters of credit outstanding under the Secured Letter of Credit Facility do not reduce the available line of credit available under the Revolving Credit Agreement.

Note 6 — Pension Plans

The components of net periodic pension cost (benefit) are as follows (in thousands):

	Three Months Ended
	December 31,
	2012			2011
Service cost	$	140		$	127
Interest cost	2,244			2,391
Expected return on plan assets	(2,934		)	(2,523		)
Amortization of actuarial loss	457			398
Administrative expenses	19			21
Net pension cost (benefit)	$	(74	)	$	414

Note 7 — Income Taxes

Our effective tax rate for the three months ended December 31, 2012 is lower than the U.S. federal statutory tax rate primarily due to the amount of income earned in foreign tax jurisdictions that is taxed at lower rates than the U.S. federal statutory tax rate.

Our effective tax rate for the three months ended December 31, 2012 was 30% as compared to 29% for the year ended September 30, 2012. The annual effective tax rate for fiscal 2012 reflected the U.S. federal research and development credit generated through December 31, 2011, the date on which the credit expired, in addition to being decreased by the favorable resolution of tax matters with various tax authorities which was offset by additional U.S. taxes from receipt of a foreign dividend.

The amount of unrecognized tax benefits was $8.3 million as of December 31, 2012 and $8.3 million as of September 30, 2012, exclusive of interest and penalties. At December 31, 2012, the amount of unrecognized tax benefits from permanent tax adjustments that, if recognized, would favorably impact the effective rate was $6.4 million. During the next 12 months, it is reasonably possible that resolution of reviews by taxing authorities, both domestic and international, could be reached with respect to approximately $4.9 million of the unrecognized tax benefits depending on the timing of examinations, expiration of statute of limitations, either because our tax positions are sustained or because we agree to their disallowance and pay the related income tax.

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We are subject to ongoing audits from various taxing authorities in the jurisdictions in which we do business. As of December 31, 2012, the tax years open under the statute of limitations in significant jurisdictions include 2007-2011 in the U.K., 2007-2011 in New Zealand and 2008-2011 in the U.S. We have effectively settled all tax matters with the IRS for fiscal years prior to fiscal year 2011. We believe we have adequately provided for uncertain tax issues that have not yet resolved with federal, state and foreign tax authorities.

Note 8 — Derivative Instruments and Hedging Activities

In order to manage our exposure to fluctuations in interest and foreign currency exchange rates we utilize derivative financial instruments such as forward starting swaps and foreign currency forwards. We do not use any derivative financial instruments for trading or other speculative purposes.

All derivatives are recorded at fair value, however, the classification of gains and losses resulting from changes in the fair values of derivatives are dependent on the intended use of the derivative and its resulting designation. If a derivative is designated as a fair value hedge, then a change in the fair value of the derivative is offset against the change in the fair value of the underlying hedged item and only the ineffective portion of the hedge, if any, is recognized in earnings. If a derivative is designated as a cash flow hedge, then the effective portion of a change in the fair value of the derivative is recognized as a component of accumulated other comprehensive income until the underlying hedged item is recognized in earnings, or the forecasted transaction is no longer probable of occurring. If a derivative does not qualify as a highly effective hedge, any change in fair value is immediately recognized in earnings. We formally document all hedging relationships for all derivative hedges and the underlying hedged items, as well as the risk management objectives and strategies for undertaking the hedge transactions. We classify the fair value of all derivative contracts as current or non-current assets or liabilities, depending on the realized and unrealized gain or loss position of the hedged contract at the balance sheet date, and the timing of future cash flows. The cash flows from derivatives treated as hedges are classified in the Condensed Consolidated Statements of Cash Flows in the same category as the item being hedged.

The following table shows the notional principal amounts of our outstanding derivative instruments as of December 31, 2012 and September 30, 2012 (in thousands):

	Notional Principal
	December 31, 2012		September 30, 2012
Instruments designated as accounting hedges:
Foreign currency forwards	$	393,902	$	382,500
Forward starting swap	58,415		58,415

Instruments not designated as accounting hedges:
Foreign currency forwards	8,511		5,945

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The notional principal amounts for outstanding derivative instruments provide one measure of the transaction volume outstanding and do not represent the amount of our exposure to credit or market loss. Credit risk represents our gross exposure to potential accounting loss on derivative instruments that are outstanding or unsettled if all counterparties failed to perform according to the terms of the contract, based on then-current interest or currency exchange rates at each respective date. Our exposure to credit loss and market risk will vary over time as a function of interest and currency exchange rates. The amount of credit risk from derivative instruments and hedging activities was not material for the periods ended December 31, 2012 and September 30, 2012. Although the table above reflects the notional principal amounts of our forward starting swaps and foreign exchange instruments, it does not reflect the gains or losses associated with the exposures and transactions that the forward starting swaps and foreign exchange instruments are intended to hedge. The amounts ultimately realized upon settlement of these financial instruments, together with the gains and losses on the underlying exposures, will depend on actual market conditions during the remaining life of the instruments.

We generally enter into master netting arrangements, which reduce credit risk by permitting net settlement of transactions with the same counterparty. We present our derivative assets and derivative liabilities at their gross fair values. We did not have any derivative instruments with credit-risk related contingent features that would require it to post collateral as of December 31, 2012 or September 30, 2012.

The table below presents the fair value of our derivative financial instruments that qualify for hedge accounting as well as their classification on the consolidated balance sheets as of December 31, 2012 and September 30, 2012 (in thousands):

		Fair Value
	Balance Sheet Location	December 31, 2012		September 30, 2012
Asset derivatives:
Foreign currency forwards	Other current assets	$	2,552	$	3,779
Foreign currency forwards	Other noncurrent assets	2,612		3,713
		$	5,164	$	7,492
Liability derivatives:
Foreign currency forwards	Other current liabilities	$	5,564	$	6,839
Foreign currency forwards	Other noncurrent liabilities	3,831		6,407
Forward starting swap	Other noncurrent liabilities	473		91
Total		$	9,868	$	13,337

The tables below present gains and losses recognized in other comprehensive income (OCI) for the three months ended December 31, 2012 and 2011 related to derivative financial instruments designated as cash flow hedges, as well as the amount of gains and losses reclassified into earnings during those periods (in thousands):

	December 31, 2012						December 31, 2011
Derivative Type	Gains (losses) recognized in OCI			Gains (losses) reclassified into earnings - Effective Portion			Gains (losses) recognized in OCI			Gains (losses) reclassified into earnings - Effective Portion
Foreign currency forwards	$	(457	)	$	(2,072	)	$	(4,949	)	$	(3,165	)
Forward starting swap	(473		)	—			—			—

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The amount of gains and losses from derivative instruments and hedging activities classified as not highly effective did not have a material impact on the results of operations for the three months ended December 31, 2012 and 2011. The amount of estimated unrealized net losses from cash flow hedges which are expected to be reclassified to earnings in the next twelve months is $1.9 million, net of income taxes.

Forward starting swap

In connection with a transportation systems contract that we entered in December 2011 with the Chicago Transit Authority, we will incur significant costs to develop the customer’s fare collection system before we begin receiving payments under the contract. In order to finance certain of these costs, we plan to issue approximately $83 million of 10-year fixed rate debt on or about January 1, 2014. We are concerned that market interest rates for the 10-year forward period of January 1, 2014 to January 1, 2024 will change through January 1, 2014, exposing the LIBOR benchmark component of each of the 20 projected semi-annual interest cash flows of that future 10-year period to risk of variability. Therefore, in July 2012 we entered into a forward-starting 10-year swap contract with a bank to reduce the interest rate variability exposure of the projected interest cash flows. The forward-starting swap has a notional amount of $58.4 million, a termination date of January 1, 2014 and a pay 1.698% fixed rate, receive 3-month LIBOR, with fixed rate payments due semi-annually on the first day each June and December commencing June 1, 2014 through December 2023, floating payments due quarterly on the first day of each quarter commencing March 1, 2014 through December 2023, and floating reset dates two days prior to the first day of each calculation period. The swap contracts accrual period, January 1, 2014 to December 1, 2023 is designed to match the tenor of the planned debt issuance.

Foreign currency forwards

In order to limit our exposure to foreign currency exchange rate risk we generally hedge those commitments greater than $50,000 by using foreign currency exchange forward and option contracts that are denominated in currencies other than the functional currency of the subsidiary responsible for the commitment, typically the British pound, Canadian dollar, Singapore dollar, euro, Swedish krona, New Zealand dollar and Australian dollar. These contracts are designed to be effective hedges regardless of the direction or magnitude of any foreign currency exchange rate change, because they result in an equal and opposite income or cost stream that offsets the change in the value of the underlying commitment.

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Note 9 — Segment Information

Business segment financial data is as follows (in millions):

	Three Months Ended
	December 31,
	2012			2011
Sales:
Transportation Systems	$	118.6		$	125.8
Mission Support Services	113.4			107.5
Defense Systems	81.2			83.3
Other	0.2			0.2
Total sales	$	313.4		$	316.8

Operating income (loss):
Transportation Systems	$	13.2		$	17.9
Mission Support Services	4.2			4.5
Defense Systems	1.2			6.0
Unallocated corporate expenses and other	(0.4		)	(0.6		)
Total operating income	$	18.2		$	27.8

Depreciation and amortization:
Transportation Systems	$	0.5		$	0.9
Mission Support Services	3.1			3.5
Defense Systems	0.8			1.2
Other	0.3			0.2
Total depreciation and amortization	$	4.7		$	5.8

Changes in estimates on contracts for which revenue is recognized using the cost-to-cost percentage-of-completion method had no significant impact on operating profit in the three months ended December 31, 2012, but increased operating profit by $1.2 million in the three months ended December 31, 2011. These adjustments increased net income by $0.9 million ($0.03 per share) in the three months ended December 31, 2011.

Note 10 — Legal Matters

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date of the payment, so there was no impact on 2012 earnings related to this matter other than interest accrued of $0.2 million. Through September 30, 2012 we did not accrue a liability for any additional pre-judgment interest, as we were unable to estimate a probability of loss for these amounts. In January 2013, the District Court decided in favor of the plaintiff for pre-judgment interest totaling $0.6 million. This amount was recognized as expense in the first quarter of fiscal 2013.

In November 2011, we received a claim from a public transit authority customer which alleges that the authority incurred a loss of transit revenue due to the inappropriate and illegal actions of one of our former employees, who has plead guilty to the charges. This individual was employed to work on a contract we acquired in a business combination in 2009 and had allegedly been committing these illegal acts from almost two years prior to our acquisition of the contract, until his arrest in May 2011. The transit system was designed and installed by a company unrelated to us. The claim seeks recoupment from us of the alleged lost revenue and an unspecified amount of fees and damages. In March 2012, the county superior court entered a default judgment against our former employee and others for $2.9 million based upon the estimated loss of revenue by the public transit authority customer. In the quarter ended March 31, 2012, we recorded an accrued cost of $2.9 million within general and administrative expense in the transportation systems segment based upon the court’s assessment of these losses. We are currently unable to estimate the amount of any other fees or damages related to this matter in excess of the amount that has been recorded through December 31, 2012. Insurance may cover all, or a portion, of any losses we could ultimately incur for this matter. However, any potential insurance proceeds will not be recognized in the financial statements until receipt of any such proceeds is assured.

We are not a party to any other material pending proceedings and we consider all other matters to be ordinary proceedings incidental to the business. We believe the outcome of these other proceedings will not have a materially adverse effect on our financial position, results of operations, or cash flows.

Note 11 — Subsequent Events

On January 24, 2013 we acquired all of the outstanding capital stock of NextBus, Inc. as well as certain contracts that were owned by the former owner of NextBus, for cash of $20.7 million. NextBus provides real-time passenger information systems to transit agencies.

We have completed an evaluation of all subsequent events through the issuance date of these consolidated financial statements and concluded no other subsequent events have occurred that require recognition or disclosure.

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CUBIC CORPORATION

ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

December 31, 2012

We are a leading international provider of cost-effective systems and solutions that address the mass transit and global defense markets’ most pressing and demanding requirements. We are engaged in the design, development, manufacture, integration, and sustainment of advanced technology systems and products. We also provide a broad range of engineering, training, technical, logistic, and information technology services. We serve the needs of various federal and regional government agencies in the U.S. and other allied nations around the world with products and services that have both defense and civil applications. Our main areas of focus are in mass transit fare collection, defense, intelligence, homeland security, and information technology, including cyber security.

We operate in three reportable business segments: Cubic Transportation Systems (CTS), Mission Support Services (MSS) and Cubic Defense Systems (CDS). We organize our business segments based on the nature of the products and services offered.

CTS develops and delivers innovative fare collection systems and services for public transit authorities worldwide. We provide fare collection devices, software and multiagency, multimodal transportation integration technologies, as well as a full scope of operational services that allow the agencies to efficiently collect fares, manage their operations, reduce fare evasion and make using public transit a more convenient and attractive option for commuters. We provide a wide range of services for transit authorities in 20 regions worldwide, including computer hosting services, call center and web services, payment media issuance and distribution services, retail point of sale network management, payment processing, financial clearing and settlement, software application support and outsourced asset operations and maintenance.

MSS is a leading provider of highly specialized support services to the U.S. government and allied nations. Services provided include live, virtual and constructive training, real-world mission rehearsal exercises, professional military education, intelligence support, information technology, information assurance and related cyber support, development of military doctrine, consequence management, infrastructure protection and force protection, as well as support to field operations, force deployment and redeployment and logistics.

CDS is focused on two primary lines of business: Training Systems and Secure Communications. CDS is a diversified supplier of live and virtual military training systems, and secure communication systems and products to the U. S. Department of Defense, other U.S. government agencies and allied nations. As a prime contractor on more than 75% of our contracts, we design and manufacture instrumented range systems for fighter aircraft, armored vehicles and infantry force-on-force live training weapons effects simulations, laser-based tactical and communication systems, and precision gunnery solutions. Our secure communications products are aimed at intelligence, surveillance, search and rescue, multi-band communication tracking devices, and cross domain hardware solutions to address multi-level security requirements.

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Consolidated Overview

Sales for the quarter ended December 31, 2012 were $313.4 million compared to $316.8 million in the quarter ended December 31, 2011, a decrease of 1%. CTS sales decreased 6% and CDS sales decreased 3% compared to the first quarter of last year while MSS sales increased 5%. The sales generated by the operations of NEK Special Programs Group LLC (NEK), which was acquired on December 14, 2012, were not significant for the quarter. See the segment discussions following for further analysis of segment sales.

Operating income was $18.2 million in the first quarter of fiscal 2013 compared to $27.8 million in the first quarter of fiscal 2012, a decrease of 34%. CTS operating income decreased 26%, MSS operating income decreased 7% and CDS operating income decreased 80% compared to the first quarter of last year. NEK’s operating loss for the first quarter of 2013 was $0.5 million, which included transaction costs of $0.4 million. Corporate and other costs for the first quarter of 2013 were $0.4 million compared to $0.6 million in 2012.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) for the first quarter of fiscal 2013 was $23.0 million, compared to $33.6 million in the first quarter of fiscal 2012. The decrease was due to lower operating income in all three segments, partially offset by a $1.1 million decrease in depreciation and amortization, primarily in MSS. See below for a reconciliation of this non-GAAP metric to net income and an explanation of why we believe it to be an important measure of performance.

Net income attributable to Cubic for the first quarter of fiscal 2013 was $12.4 million, or 47 cents per share, compared to $20.7 million, or 77 cents per share in 2012. Net income decreased for the quarter due to a decrease in operating income, a decrease in other income and an increase in interest expense. These decreases were partially offset by lower income tax expense due to the decrease in income before income taxes, although the effective tax rate in the first quarter was slightly higher this year, as described below. Included in other income was a net foreign currency exchange gain of $0.1 million in the first quarter of fiscal 2013 compared to a gain of $1.2 million in the first quarter of fiscal 2012. In the first quarter of fiscal 2013, we recorded $0.6 million of interest expense related to a judgment against us, which requires us to pay such amount of interest to the court on behalf of a party that had filed claims against us.

Our gross margin percentages on products and services did not change significantly between the first quarter of 2012 and 2013. However, product sales decreased $17.6 million, or 11.5%, while services sales increased by $14.2 million, or 8.7%. The lower gross margin percentage on services sales contributed to gross profits that were $3.3 million lower in the first quarter this year compared to the first quarter of fiscal 2012.

Selling, general and administrative (SG&A) expenses increased in the first quarter of 2013 to $41.0 million compared to $35.2 million in 2012. As a percentage of sales, SG&A expenses were 13% for the first quarter of 2013 compared to 11% in 2012. SG&A expenses increased in all business segments primarily due to higher selling and marketing costs, and increased information technology costs. In addition, during the first quarter of 2013 we incurred $1.1 million of professional services costs in connection with the restatement of our consolidated financial statements for the year ended September 30, 2012 and previous periods. Also, in the first quarter of 2013 SG&A expenses were reduced by $1.4 million related to proceeds from an insurance claim for losses that we incurred over the period from fiscal 2010 to fiscal 2012. In addition, SG&A expenses for NEK were $0.5 million for the first quarter of 2013.

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Company funded research and development expenditures, which mainly relate to new defense technologies we are developing, increased to $5.8 million for the first quarter of 2013 compared to $4.9 million in 2012. Amortization of purchased intangibles decreased in the first quarter of 2013 to $3.6 million compared to $4.0 million in the first quarter of 2012, primarily due to the decrease in the amortization of certain intangible assets related to our acquisition of Abraxas Corporation (Abraxas) in December 2010 that are being amortized using accelerated amortization methods. The decrease in amortization expense was partially offset by the amortization of intangible assets recorded in connection with our acquisition of NEK in December 2012, which totaled $0.2 million in the first quarter of fiscal 2013.

Based on the tax law that was in effect at the end of the first quarter of fiscal 2013, we estimated our annual effective tax rate to be approximately 30%, which is reflected in the tax provision for the first quarter.

The American Taxpayer Relief Act of 2012, which reinstated the U.S. federal research and development tax credit retroactively from January 1, 2012 through December 31, 2013, was not enacted into law until the second quarter of fiscal 2013. Therefore, the expected tax benefit resulting from such reinstatement for fiscal 2013 will not be reflected in our estimated annual effective tax rate for fiscal 2013 until the second fiscal quarter. Additionally, we expect to record a discrete tax benefit of approximately $1.7 million in the second quarter of fiscal 2013 related to the reinstatement of the federal research and development tax credit for fiscal 2012. After consideration of both of these items, we estimate our annual effective income tax rate for fiscal 2013 will be approximately 26%. The effective rate for fiscal 2013 could be affected by, among other factors, the mix of business between the U.S. and foreign jurisdictions, our ability to take advantage of available tax credits and audits of our records by taxing authorities.

Transportation Systems Segment (CTS)

	Three Months Ended
	December 31,
	2012		2011
	(in millions)
Transportation Systems Segment Sales	$	118.6	$	125.8

Transportation Systems Segment Operating Income	$	13.2	$	17.9

CTS sales decreased 6% to $118.6 million compared to $125.8 million last year. The primary reason for the decrease in sales was due to reduced work on a contract to design and build a system in Vancouver. In last year’s first quarter revenues were higher on the project as we were producing a significant amount of the hardware for the system, while this year we are in the latter stages of the system delivery. This decrease was partially offset by higher sales from a contract to design and build a system in Sydney, Australia. The average exchange rates between the prevailing currency in our foreign operations and the U.S. Dollar resulted in an increase in sales of $2.6 million when compared to the first quarter of 2012 exchange rates.

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Operating income from CTS decreased 26% in the first quarter this year to $13.2 million, compared to $17.9 million in the first quarter of last year. We are currently incurring costs related to our contract in Sydney, Australia to transition portions of the system into full operations, for which revenues are not sufficient to cover our costs of servicing the system. This situation should improve as the systems complete the transition phase and move into full operations. In addition, we realized lower margins on certain projects in the U.K. during the first quarter of this year than we had earned on similar projects in the first quarter last year. These decreases in operating income were partially offset by sales of certain higher margin fare system products in North America. The average exchange rates between the prevailing currency in our foreign operations and the U.S. Dollar resulted in an increase in operating income of $0.3 million when compared to the first quarter of 2012 exchange rates.

Mission Support Services Segment (MSS)

	Three Months Ended
	December 31,
	2012		2011
	(in millions)
Mission Support Services Segment Sales	$	113.4	$	107.5

Mission Support Services Segment Operating Income	$	4.2	$	4.5

Sales from MSS increased 5% to $113.4 million in the first quarter this year, from $107.5 million in the first quarter of last year. Sales growth was driven by an increase in activity during the first quarter at the Joint Readiness Training Center (JRTC) in Fort Polk, Louisiana and by higher Abraxas sales. These increases were partially offset by lower sales due the loss of a contract in 2012 for flight simulator training work, because of a lower bid by a competitor. The sales generated by the operations of the newly acquired NEK business were not significant for the quarter.

MSS operating income decreased 7% to $4.2 million in the first quarter this year from $4.5 million in the first quarter of last year. The loss of the training work for flight simulators described above had a negative impact on operating income for the first quarter of this year, and cost growth on a training contract in Europe also contributed to the decrease in margins. In addition, NEK had an operating loss of $0.5 million in the first quarter of fiscal 2013 primarily due to the incurrence of $0.4 million of acquisition-related costs. These decreases in operating profits were partially offset by increased margins on increased Abraxas sales. The amortization expense for MSS intangible assets decreased from $3.3 million in the first quarter of fiscal 2012 to $2.9 million in the first quarter of fiscal 2013.

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Defense Systems Segment (CDS)

	Three Months Ended
	December 31,
	2012			2011
	(in millions)
Defense Systems Segment Sales
Training systems	$	65.6		$	64.7
Secure communications	11.6			15.0
Other	4.0			3.6
	$	81.2		$	83.3

Defense Systems Segment Operating Income
Training systems	$	2.5		$	4.8
Secure communications	0.3			3.2
Other	(1.6		)	(2.0		)
	$	1.2		$	6.0

Training Systems

Training systems sales increased 1% in the first quarter this year to $65.6 million compared to $64.7 million in the first quarter of last year. Operating income decreased 48% for the quarter from $4.8 million last year to $2.5 million this year. Increased sales of air combat training systems in the first quarter of fiscal 2013 were nearly offset by decreased sales of small arms training systems in the Middle East and to the U.S. government. The decreases in operating income were the result of decreased sales of the relatively high margin small arms training systems. Also, although total sales of air combat training systems increased in the first quarter of fiscal 2013, sales of higher margin air combat training systems to a customer in the Far East decreased, which decreased overall margins from air combat training systems.

Secure Communications

Secure communications sales decreased 23% in the first quarter this year to $11.6 million compared to $15.0 million in the first quarter of last year. Operating income decreased to $0.3 million in the first quarter this year from $3.2 million in the first quarter of last year. Decreased profitability on lower data link sales, including the impact of $1.2 million cost increase on a U.S. government contract, contributed to the decrease in operating income. Sales and operating profits were also lower from power amplifiers and personnel locater systems.

Other

Higher margins on increased sales of cross domain and global asset tracking products slightly decreased the operating losses that resulted from our continued investment in the development and marketing of these products.

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Backlog

	December 31,		September 30,
	2012		2012
	(in millions)
Total backlog
Transportation Systems	$	1,665.3	$	1,663.7
Mission Support Services	746.6		737.0
Defense Systems:
Training systems	341.4		362.0
Secure communications	39.3		42.1
Other	23.8		26.8
Total Defense Systems	404.5		430.9
Total	$	2,816.4	$	2,831.6

Funded backlog
Transportation Systems	$	1,665.3	$	1,663.7
Mission Support Services	257.3		248.1
Defense Systems:
Training systems	341.4		362.0
Secure communications	39.3		42.1
Other	23.8		26.8
Total Defense Systems	404.5		430.9
Total	$	2,327.1	$	2,342.7

Total backlog decreased $15.2 million from September 30, 2012 to December 31, 2012. Decreases in backlog for CDS were partially offset by increases in backlog at CTS and MSS. The increase in MSS backlog was primarily due to the addition of $19.5 million of backlog from the acquisition of NEK, partially offset by decreases in backlog on other contracts. In the past, many of the contracts we were awarded in MSS were long-term in nature, spanning periods of five to ten years. The U.S. Department of Defense now awards shorter-term contracts for the services we provide and increasingly relies upon Indefinite Delivery/Indefinite Quantity (ID/IQ) contracts, which results in a lower backlog due to the shorter-term nature of these ID/IQ awards. CDS backlog has been negatively impacted by recent delays in contract awards and extensions, which are due in part to the budgetary uncertainties experienced by our U.S. governmental agency customers. Changes in exchange rates between the prevailing currency in our foreign operations and the U.S. Dollar as of the end of the quarter added $2.4 million to backlog compared to September 30, 2012.

The difference between total backlog and funded backlog represents options under multiyear service contracts. Funding for these contracts comes from annual operating budgets of the U.S. government and the options are normally exercised annually. Funded backlog includes unfilled firm orders for our products and services for which funding has been both authorized and appropriated by the customer (Congress, in the case of U.S. government agencies). Options for the purchase of additional systems or equipment are not included in backlog until exercised. In addition to the amounts identified above, we have been selected as a participant in or, in some cases, the sole contractor for several substantial indefinite delivery/ indefinite quantity (IDIQ) contracts. IDIQ contracts are not included in backlog until an order is received. We also have several service contracts in our transportation business that include contingent revenue provisions tied to meeting certain performance criteria. These variable revenues are also not included in the amounts identified above.

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Adjusted EBITDA

Adjusted EBITDA represents net income attributable to Cubic before interest, taxes, non-operating income, depreciation and amortization. We believe that the presentation of Adjusted EBITDA included in this report provides useful information to investors with which to analyze our operating trends and performance and ability to service and incur debt. Also, Adjusted EBITDA is a factor we use in measuring our performance and compensating certain of our executives. Further, we believe Adjusted EBITDA facilitates company-to-company operating performance comparisons by backing out potential differences caused by variations in capital structures (affecting net interest expense), taxation and the age and book depreciation of property, plant and equipment (affecting relative depreciation expense), and non-operating expenses which may vary for different companies for reasons unrelated to operating performance. In addition, we believe that Adjusted EBITDA is frequently used by securities analysts, investors and other interested parties in their evaluation of companies, many of which present an Adjusted EBITDA measure when reporting their results. Adjusted EBITDA is not a measurement of financial performance under GAAP and should not be considered as an alternative to net income as a measure of performance. In addition, other companies may define Adjusted EBITDA differently and, as a result, our measure of Adjusted EBITDA may not be directly comparable to Adjusted EBITDA of other companies. Furthermore, Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

· Adjusted EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;

· Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

· Adjusted EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;

· Adjusted EBITDA does not reflect our provision for income taxes, which may vary significantly from period to period; and

· although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements.

Because of these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only supplementally. You are cautioned not to place undue reliance on Adjusted EBITDA.

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The following table reconciles Adjusted EBITDA to net income attributable to Cubic, which we consider to be the most directly comparable GAAP financial measure to Adjusted EBITDA:

	Three Months Ended
	December 31,
	2012			2011
	(in thousands)
Reconciliation:
Net income attributable to Cubic	$	12,446		$	20,694
Add:
Provision for income taxes	5,400			8,353
Interest expense (income), net	425			(415		)
Other income, net	(102		)	(923		)
Noncontrolling interest in income of VIE	73			45
Depreciation and amortization	4,718			5,832
ADJUSTED EBITDA	$	22,960		$	33,586

Liquidity and Capital Resources

Operating activities used cash of $26.1 million for the first quarter of the fiscal year. Increases in accounts receivable and long-term capitalized contract costs and decreases in accounts payable and other current liabilities contributed to the use of cash. All three segments contributed to the use of cash from operating activities.

Investing activities for the three-month period included $33.1 million of cash paid related to the acquisition of NEK and capital expenditures of $1.4 million. Financing activities for the three-month period consisted of scheduled payments on our long-term debt of $4.1 million and $25.0 million of proceeds from short-term borrowings on our revolving line of credit.

We have a committed revolving credit agreement with a group of financial institutions in the amount of $200.0 million that expires in May 2017 (Revolving Credit Agreement). The available line of credit on the Revolving Credit Agreement is reduced by any letters of credit issued under the agreement. As of December 31, 2012, there were borrowings of $25.0 million under this agreement, of which $5.0 million was repaid in February 2013. Our borrowings under the Revolving Credit Agreement bear interest at a variable rate (1.6% at December 31, 2012). In addition, there were letters of credit outstanding under the Revolving Credit Agreement totaling $42.4 million, which reduce the available line of credit to $132.6 million.

We have a secured letter of credit facility agreement with a bank (Secured Letter of Credit Facility) which expires in February 2013. We are currently negotiating an extension of the term of the agreement for approximately one year. At December 31, 2012 there were letters of credit outstanding under this agreement of $63.4 million. In support of the Secured Letter of Credit Facility, we placed $68.8 million of our cash on deposit in the U.K. as collateral in a restricted account with the bank providing the facility. We are required to leave the cash in the restricted account so long as the bank continues to maintain associated letters of credit under the facility. The maximum amount of letters of credit currently allowed by the facility is $66.8 million, and any increase above this amount would require bank approval and additional restricted funds to be placed on deposit. We may choose at any time to terminate the facility and move the associated letters of credit to another credit facility. Letters of credit outstanding under the Secured Letter of Credit Facility do not reduce the available line of credit available under the Revolving Credit Agreement.

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As of December 31, 2012, $165.1 million of the $174.1 million of our cash, cash equivalents, and short-term investments was held by our foreign subsidiaries. If these funds are needed for our operations in the U.S., we would be required to accrue and pay U.S. taxes to repatriate these funds. However, our intent is to permanently reinvest these funds outside of the U.S. and our current plans do not demonstrate a need to repatriate them to fund our U.S. operations.

Our financial condition remains strong with working capital of $386.9 million and a current ratio of 2.3 to 1 at December 31, 2012. We expect that cash on hand, cash flows from operations, and our unused lines of credit will be adequate to meet our liquidity requirements for the foreseeable future.

Critical Accounting Policies, Estimates and Judgments

Our financial statements are prepared in accordance with accounting principles that are generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. We continually evaluate our estimates and judgments, the most critical of which are those related to revenue recognition, income taxes, valuation of goodwill, purchased intangibles and pension costs. We base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known.

Besides the estimates identified above that are considered critical, we make many other accounting estimates in preparing our financial statements and related disclosures. All estimates, whether or not deemed critical affect reported amounts of assets, liabilities, revenues and expenses, as well as disclosures of contingent assets and liabilities. These estimates and judgments are also based on historical experience and other factors that are believed to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known, even for estimates and judgments that are not deemed critical.

There have been no significant changes to our critical accounting policies and estimates described under “Item 7 . Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies, Estimates and Judgments” in our Annual Report on Form 10-K for the year ended September 30, 2012, other than the addition of the following:

Recognizing assets acquired and liabilities assumed in business combinations.

Acquired assets and assumed liabilities are recognized in a business combination on the basis of their fair values at the date of acquisition. We assess fair value, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, using a variety of methods including an income approach such as a present value technique or a cost approach such as the estimation of current selling prices and replacement values. Fair value of the assets acquired and liabilities assumed, including

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intangible assets, in-process research and development, and contingent payments, are measured based on the assumptions and estimations with regards to the variable factors such as the amount and timing of future cash flows for the asset or liability being measured, appropriate risk-adjusted discount rates, nonperformance risk, or other factors that market participants would consider. Upon acquisition, we determine the estimated economic lives of the acquired intangible assets for amortization purposes, which are based on the underlying expected cash flows of such assets. Adjustments to inventory are based on the fair market value of inventory and amortized into income based on the period in which the underlying inventory is sold. Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Actual results may vary from projected results and assumptions used in the fair value assessments.

CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING INFORMATION

This report, including the documents that we incorporate by reference, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to the “safe harbor” created by those sections. Any statements about our expectations, beliefs, plans, objectives, assumptions, future events or our future financial and/or operating performance are not historical and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “may,” “will,” “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “predict,” “potential,” “opportunity” and similar words or phrases or the negatives of these words or phrases. These statements involve risks, estimates, assumptions and uncertainties, including those discussed in “Risk Factors” in our Annual Report on Form 10-K for the year ended September 30, 2012, and throughout this report that could cause actual results to differ materially from those expressed in these statements. Such risks, estimates, assumptions and uncertainties include, among others:

· unanticipated issues related to the restatement of our financial statements;

· our ability to develop and implement new processes and procedures to remediate the material weaknesses that exist in our internal control over financial reporting;

· our dependence on U.S. and foreign government contracts;

· delays in approving U.S. and foreign government budgets and cuts in U.S. and foreign government defense expenditures;

· the ability of certain government agencies to unilaterally terminate or modify our contracts with them;

· our ability to successfully integrate new companies into our business and to properly assess the effects of such integration on our financial condition;

· the U.S. government’s increased emphasis on awarding contracts to small businesses, and our ability to retain existing contracts or win new contracts under competitive bidding processes;

· negative audits by the U.S. government;

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· the effects of politics and economic conditions on negotiations and business dealings in the various countries in which we do business or intend to do business;

· competition and technology changes in the defense and transportation industries;

· our ability to accurately estimate the time and resources necessary to satisfy obligations under our contracts;

· the effect of adverse regulatory changes on our ability to sell products and services;

· our ability to identify, attract and retain qualified employees;

· business disruptions due to cyber security threats, physical threats, terrorist acts, acts of nature and public health crises;

· our involvement in litigation, including litigation related to patents, proprietary rights and employee misconduct;

· our reliance on subcontractors and on a limited number of third parties to manufacture and supply our products;

· our ability to comply with our development contracts and to successfully develop, introduce and sell new products, systems and services in current and future markets;

· defects in, or a lack of adequate coverage by insurance or indemnity for, our products and systems;

· changes in U.S. and foreign tax laws, exchange rates or our economic assumptions regarding our pension plans; and

· other factors discussed elsewhere in this report.

Because the risks, estimates, assumptions and uncertainties referred to above could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us or on our behalf, you should not place undue reliance on any forward-looking statements. In addition, past financial and/or operating performance is not necessarily a reliable indicator of future performance and you should not use our historical performance to anticipate results or future period trends. Further, any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

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ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our market risks at December 31, 2012 have not changed significantly from those described under “Item 7A. Quantitative and Qualitative Disclosure about Market Risk” in our Annual Report on Form 10-K for the year ended September 30, 2012.

ITEM 4 - CONTROLS AND PROCEDURES

We performed an evaluation of the effectiveness of our disclosure controls and procedures as of December 31, 2012. The evaluation was performed with the participation of senior management of each business segment and key corporate functions, and under the supervision of our Chief Executive Officer and our Chief Financial Officer. Based upon our evaluation we identified material weaknesses in internal control over financial reporting for such periods.

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act) are designed to provide reasonable assurance that information required to be disclosed in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (SEC) and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

As described below, management has identified material weaknesses in our internal control over financial reporting, which is an integral component of our disclosure controls and procedures. As a result of those material weaknesses, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of December 31, 2012.

A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In connection with management’s assessment of our internal control over financial reporting described above, management has identified the following deficiencies that constituted individually, or in the aggregate, material weaknesses in our internal control over financial reporting as of December 31, 2012:

· In our process of assessing the appropriate accounting treatment for revenue and costs for certain of our contracts with customers, we did not maintain a sufficient number of personnel with an appropriate level of U.S. generally accepted accounting principles (GAAP) knowledge and experience or ongoing training in the application of GAAP commensurate with the number and complexity of our contracts to prevent or detect material misstatements in revenue or cost of sales in a timely manner.

· Our policies for the review and approval of revenue recognition decisions required review and analysis by personnel with an appropriate level of GAAP knowledge and experience for contracts over certain materiality thresholds. These thresholds were not designed to ensure that sufficient review was being performed for revenue recognition decisions that could have a material impact on our financial statements.

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Because of these material weaknesses, management has concluded that we did not maintain effective internal control over financial reporting as of December 31, 2012.

Changes in Internal Control over Financial Reporting — There were no changes in our internal control over financial reporting during the quarter ended December 31, 2012 that materially affected or are reasonably likely to materially affect our internal control over financial reporting. However, as described below under “Plans for Remediation of Material Weaknesses,” we have continued to dedicate resources to support our efforts to improve the control environment and to remedy the control weaknesses described herein.

Plans for Remediation of Material Weaknesses — We are in the process of adding resources and have begun developing and implementing new processes and procedures to remediate the material weaknesses that existed in our internal control over financial reporting, and our disclosure controls and procedures, as of December 31, 2012. We have also begun revising our internal revenue recognition policy and procedures documentation to reflect the changes in policy we have implemented, and providing additional training to personnel involved in the revenue recognition process.

We are developing a remediation plan (the “Remediation Plan”) to address the material weaknesses described above. The Remediation Plan will ensure that each area affected by a material control weakness is put through a remediation process. The Remediation Plan entails a thorough analysis which includes the following phases:

· Define and assess each control deficiency: ensure a thorough understanding of the “as is” state, process owners, and procedural or technological gaps causing the deficiency. This work is underway for all identified areas;

· Design and evaluate a remediation action for each control deficiency for each affected area: validate or improve the related policy and procedure documentation; evaluate skills of the process owners and resources dedicated to each affected area and adjust as required. The Remediation Plan will require an assessment of all control failures; we expect that many of the recent improvements will provide an appropriate starting point for the specific action plans;

· Implement specific remediation actions: train process owners, allow time for process adoption and adequate transaction volume for next steps;

· Test and measure the design and effectiveness of the remediation actions; test and provide feedback on the design and operating effectiveness of the controls; and,

· Management review and acceptance of completion of the remediation effort.

The Remediation Plan will be administered by our Director of Internal Audit and will involve key leaders from across the organization, including our Chief Executive Officer and our Chief Financial Officer. The Director of Internal Audit will report quarterly and as needed to the Audit Committee of our Board of Directors on the progress made toward completion of the Remediation Plan.

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We believe the steps taken to date have improved the effectiveness of our internal control over financial reporting, however we have not completed the corrective processes and procedures identified herein. Accordingly, as we continue to monitor the effectiveness of our internal control over financial reporting in the areas affected by the material weaknesses described above, we will perform additional procedures prescribed by management including the use of manual mitigating control procedures and employ any additional tools and resources deemed necessary to ensure that our financial statements continue to be fairly stated in all material respects.

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PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

In 1997, the Ministry of Defense for the Armed Forces of the Islamic Republic of Iran obtained a U. S. District Court judgment enforcing an arbitration award in its favor against us of $2.8 million, plus arbitration costs and interest related to a contract awarded to us by Iran in 1977. Both parties appealed to the 9th Circuit Court of Appeals. In December 2011, a decision was handed down upholding the arbitration award and requiring the district court to resolve outstanding issues related to the amount of interest to be paid and whether the plaintiff should be awarded attorney’s fees. Under a 1979 Presidential executive order, all transactions by U.S. citizens with Iran are prohibited; however, in April 2012 we received a license from the U.S. Treasury Department allowing us to remit the arbitration award and related post-judgment interest owed totaling $8.8 million to the U.S. District Court on April 18, 2012. We had recorded a liability for the judgment amount in periods prior to 2012 and had accrued interest through the date of the payment, so there was no impact on 2012 earnings related to this matter other than interest accrued of $0.2 million. Through September 30, 2012 we did not accrue a liability for any additional pre-judgment interest, as we were unable to estimate a probability of loss for these amounts. On January 3, 2013, the District Court decided in favor of the plaintiff for pre-judgment interest totaling $0.6 million. This amount was recognized as expense in the first quarter of fiscal 2013.

ITEM 1A - RISK FACTORS

There have been no material changes to the risk factors previously disclosed in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended September 30, 2012, other than those set forth below, which should be read in conjunction with the risk factors disclosed therein.

Risks Relating to Our Business

We depend on government contracts for substantially all of our revenues and the loss of government contracts or a delay or decline in funding of existing or future government contracts could decrease our backlog or adversely affect our sales and cash flows and our ability to fund our growth.

Our revenues from contracts, directly or indirectly, with foreign and U.S. state, regional and local governmental agencies represented more than 99% of our total revenues in fiscal year 2012. Although these various government agencies are subject to common budgetary pressures and other factors, many of our various government customers exercise independent purchasing decisions. As a result of the concentration of business with governmental agencies, we are vulnerable to adverse changes in our revenues, income and cash flows if a significant number of our government contracts, subcontracts or prospects are delayed or canceled for budgetary or other reasons.

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The factors that could cause us to lose these contracts and could decrease our backlog or otherwise materially harm our business, prospects, financial condition or results of operations include:

· budget constraints affecting government spending generally, or specific departments or agencies such as U.S. or foreign defense and transit agencies and regional transit agencies, and changes in fiscal policies or a reduction of available funding;

· re-allocation of government resources as the result of actual or threatened terrorism or hostile activities or for other reasons;

· disruptions in our customers’ ability to access funding from capital markets;

· curtailment of government’s use of outsourced service providers and government’s in-sourcing of certain services;

· the adoption of new laws or regulations pertaining to government procurement;

· government appropriations delays or blanket reductions in departmental budgets;

· suspension or prohibition from contracting with the government or any significant agency with which we conduct business;

· increased use of shorter duration awards by the federal government in the defense industry, which increases the frequency we may need to recompete for work;

· impairment of our reputation or relationships with any significant government agency with which we conduct business;

· impairment of our ability to provide third-party guarantees and letters of credit; and

· delays in the payment of our invoices by government payment offices.

In addition, some of our international work is done at the request and at the expense of the U.S. government and its agencies. For example, our Mission Support Services (MSS) business provides services to 13 NATO forces, with the U.S. Department of Defense (DOD) compensating us for these services. Therefore, risks associated with performing work for the U.S. government and its agencies may also apply to our international contracts.

Government spending priorities and terms may change in a manner adverse to our businesses.

In the past, our businesses have been adversely affected by significant changes in U.S. and foreign government spending during periods of declining budgets. A significant decline in overall spending, or the decision not to exercise options to renew contracts, or the loss of or substantial decline in spending on a large program in which we participate could materially adversely affect our business, prospects, financial condition or results of operations. For example, the U.S. defense and national security budgets in general, and spending in specific agencies with which we work, such as those that are a part of the DOD, have declined from time to time for extended periods, resulting in program delays, program cancellations and a slowing of new program starts. Although spending on defense-related programs by the U.S. government and certain foreign governments has increased in recent years, such spending has decreased in recent years for certain other foreign governments, and future levels of expenditures and authorizations for defense-related programs may decrease, remain constant or shift to programs in areas where we do not currently provide products or services, thereby reducing the chances that we will be awarded new contracts.

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Even though our contract periods of performance for a program may exceed one year, Congress and certain foreign governments must usually approve funds for a given program each fiscal year and may significantly reduce funding of a program in a particular year. Significant reductions in these appropriations or the amount of new defense contracts awarded may affect our ability to complete contracts, obtain new work and grow our business. Congress and such foreign governments do not always enact spending bills by the beginning of the new fiscal year. Such delays leave the affected agencies under-funded which delays their ability to contract. Future delays and uncertainties in funding could impose additional business risks on us.

In addition, the DOD has recently increased its emphasis on awarding contracts to small businesses and awarding shorter duration contracts, each of which has the potential to reduce the amount of revenue we could otherwise earn from such contracts. Shorter duration contracts lower our backlog numbers and increase the risk associated with recompeting for a contract, as we would need to do so more often. In addition, as we may need to expend capital resources at higher levels upon the award of a new contract, the shorter the duration of the contract, the less time we have to recoup such expenditures and turn a profit under such contract.

Sequestration may adversely affect our businesses which are dependent on federal government funding.

Pursuant to laws passed in August 2011 and January 2013, unless the current presidential administration and Congress reach an agreement on spending cuts and increased revenues for the federal government before March 1, 2013, there will be deep and automatic cuts in defense budgets and other non-defense budgets. It is unknown what programs will be cut, over what time period and by what amount. Some programs may be cancelled in their entirety.

All of our U.S. defense contracts are at risk of being cut or terminated. Our domestic transportation contracts could be materially harmed if transit agencies do not receive expected federal funds and are required to curtail their plans to expand or upgrade their fare collection systems. Any cuts or cancellations of our contracts may materially harm our business, prospects, financial condition and results of operations.

Failure to retain existing contracts or win new contracts under competitive bidding processes may adversely affect our revenue.

We obtain most of our contracts through a competitive bidding process, and substantially all of the business that we expect to seek in the foreseeable future likely will be subject to a competitive bidding process. Competitive bidding presents a number of risks, including:

· the need to compete against companies or teams of companies with more financial and marketing resources and more experience in bidding on and performing major contracts than we have;

· the need to compete against companies or teams of companies that may be long-term, entrenched incumbents for a particular contract for which we are competing and that have, as a result, greater domain expertise and better customer relations;

· the need to compete to retain existing contracts that have in the past been awarded to us on a sole-source basis or as to which we have been incumbent for a long time;

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· the U.S. government’s increased emphasis on awarding contracts to small businesses could preclude us from bidding on certain work or reduce the scope of work we can bid as a prime contractor and limit the amount of revenue we could otherwise earn as a prime contractor for such contracts;

· the award of contracts to providers offering solutions at the “lowest price technically acceptable” which may lower the profit we may generate under a contract awarded using this pricing method or prevent us from submitting a bid for such work due to us deeming such work to be unprofitable;

· the reduction of margins achievable under any contracts awarded to us;

· the expense and delay that may arise if our competitors protest or challenge new contract awards;

· the need to bid on some programs in advance of the completion of their design, which may result in higher research and development expenditures, unforeseen technological difficulties, or increased costs which lower our profitability;

· the substantial cost and managerial time and effort, including design, development and marketing activities, necessary to prepare bids and proposals for contracts that may not be awarded to us;

· the need to develop, introduce and implement new and enhanced solutions to our customers’ needs;

· the need to locate and contract with teaming partners and subcontractors; and

· the need to accurately estimate the resources and cost structure that will be required to perform any fixed-price contract that we are awarded.

We may not be afforded the opportunity in the future to bid on contracts that are held by other companies and are scheduled to expire if the agency decides to extend the existing contract. If we are unable to win particular contracts that are awarded through the competitive bidding process, we may not be able to operate in the market for services that are provided under those contracts for a number of years. If we win a contract, and upon expiration the customer requires further services of the type provided by the contract, there is frequently a competitive rebidding process and there can be no assurance that we will win any particular bid, or that we will be able to replace business lost upon expiration or completion of a contract.

As a result of the complexity and scheduling of contracting with government agencies, we occasionally incur costs before receiving contractual funding by the government agency. In some circumstances, we may not be able to recover these costs in whole or in part under subsequent contractual actions.

In addition, the customers currently serviced by our Cubic Transportation Systems segment are finite in number. The loss of any one of these customers, or the failure to win replacement awards upon expiration of contracts with such customers, could have a materially adverse impact on our results of operations.

If we are unable to consistently retain existing contracts or win new contract awards, our business, prospects, financial condition and results of operations will be adversely affected.

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Many of our U.S. government customers spend their procurement budgets through multiple-award or indefinite delivery/indefinite quantity (ID/IQ) contracts, under which we are required to compete among the awardees for post-award orders. Failure to win post-award orders could affect our ability to increase our sales.

The U.S. government can select multiple winners under multiple-award contracts, federal supply schedules and other agency-specific ID/IQ contracts, as well as award subsequent purchase orders among such multiple winners. This means that there is no guarantee that these ID/IQ, multiple-award contracts will result in the actual orders equal to the ceiling value under the contract, or result in any actual orders. We are only eligible to compete for work (purchase orders and delivery orders) as an awardee pursuant to government-wide acquisition contracts already awarded to us. Our failure to compete effectively in this procurement environment could reduce our sales, which would adversely affect our business, results of operations and financial condition.

The U.S. government’s increased emphasis on awarding contracts to small businesses could preclude us from acting as a prime contractor and increase the number of contracts we receive as a subcontractor to small businesses, which could decrease the amount of our revenues from such contracts. Some of these small businesses may not be financially sound, which could adversely affect our business.

There is increased emphasis by the U.S. government on awarding contracts to small businesses which may preclude companies the size of ours from obtaining certain work, other than as a subcontractor to these small businesses. There are inherent risks in contracting with small companies that may not have the capability or financial resources to perform these contracts or administer them correctly. If a small business with which we have a subcontract fails to perform, fails to bill the government properly or fails financially, we may have difficulty receiving timely payments or may incur bad debt write-offs if the small business is unable or unwilling to pay us for work we perform. In addition, being a subcontractor may limit the amount of revenue we could otherwise earn as a prime contractor for such contracts. When we only act as a subcontractor, we may only receive up to 49% of the value of the contract award, and such percentage may be less should the small business partner or partners be able to service a larger piece of the award. Failure to maintain good relationships with small business partners operating in our industries could preclude us from winning work as a subcontractor as part of a large contracting consultation. This could result in significant adverse effects on our revenues, operating costs and cash flows.

Government audits of our contracts could result in a material charge to our earnings, have a negative effect on our cash position following an audit adjustment or adversely affect our ability to conduct future business.

U.S. government agencies, including the DOD and others, routinely audit and review a contractor’s performance on government contracts, indirect rates and pricing practices, and compliance with applicable contracting and procurement laws, regulations and standards. Based on the results of such audits, the auditing agency is authorized to adjust our unit prices if the auditing agency does not find them to be “fair and reasonable.” The auditing agency is also authorized to require us to refund any excess proceeds we received on a particular item over its final adjusted unit price.

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The DOD, in particular, also reviews the adequacy of, and compliance with, our internal control systems and policies, including our purchasing, accounting, financial capability, pricing, labor pool, overhead rate and management information systems. Our failure to obtain an “adequate” determination of our various accounting and management internal control systems from the responsible U.S. government agency could significantly and adversely affect our business, including our ability to bid on new contracts and our competitive position in the bidding process. Failure to comply with applicable contracting and procurement laws, regulations and standards could also result in the U.S. government imposing penalties and sanctions against us, including suspension of payments and increased government scrutiny that could delay or adversely affect our ability to invoice and receive timely payment on contracts or perform contracts, or could result in suspension or debarment from competing for contracts with the U.S. government. In addition, we could suffer serious harm to our reputation if allegations of impropriety were made against us, whether or not true.

In addition, transit authorities have the right to audit our work under their respective contracts. If as the result of an adverse audit finding, we were suspended or prohibited from contracting with the U.S. government, any significant government agency, or a transit authority terminates its contract with us, or if our reputation or relationship with such agencies and authorities was impaired or if they otherwise ceased doing business with us or significantly decreased the amount of business done with us, it would adversely affect our business, results of operations and financial condition.

Our international business exposes us to additional risks, including exchange rate fluctuations, foreign tax and legal regulations and political or economic instability that could harm our operating results.

Our international operations, which represented 47% of our revenues for fiscal year 2012, subject us to risks associated with operating in and selling products or services in foreign countries, including:

· devaluations and fluctuations in currency exchange rates;

· changes in foreign laws that adversely affect our ability to sell our products or services or our ability to repatriate profits to the United States;

· increases or impositions of withholding and other taxes on remittances and other payments by foreign subsidiaries or joint ventures to us;

· increases in investment and other restrictions or requirements by foreign governments in order to operate in the territory or own the subsidiary;

· costs of compliance with local laws, including labor laws;

· compliance with anti-corruption laws, anti-money laundering laws and sanctions;

· export control regulations and policies which govern our ability to supply foreign customers;

· unfamiliar and unknown business practices and customs;

· domestic and foreign government policies, including requirements to expend a portion of program funds locally and governmental industrial cooperation requirements;

· the complexity and necessity of using foreign representatives and consultants or being prohibited from such use;

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· the uncertainty of the ability of foreign customers to finance purchases;

· imposition of tariffs or embargoes, export controls and other trade restrictions;

· potentially being prohibited from bidding for international work due to perceived conflicts or national security concerns resulting from the significant amount of work we do for the U.S. government and its agencies;

· the difficulty of management and operation of an enterprise in various countries; and

· economic and geopolitical developments and conditions, including ongoing instability in global economies and financial markets, international hostilities, acts of terrorism and governmental reactions, inflation, trade relationships and military and political alliances.

Our foreign subsidiaries generally enter into contracts and make purchase commitments that are denominated in foreign currencies. Accordingly, we are exposed to fluctuations in exchange rates, which could have a significant impact on our results of operations. We have no control over the factors that generally affect this risk, such as economic, financial and political events and the supply of and demand for applicable currencies. While we use foreign exchange forward and option contracts to hedge significant contract sales and purchase commitments that are denominated in foreign currencies, our hedging strategy may not prevent us from incurring losses due to exchange fluctuations.

We may not be able to receive the necessary licenses required for us to sell our export-controlled products and services overseas. In addition, the loss of our registration as either an exporter or a broker under International Traffic in Arms Regulations (ITAR), would adversely affect our business, results of operations and financial condition.

U.S. government agencies, primarily the Directorate of Defense Trade Controls within the State Department and the Bureau of Industry Security within the U.S. Department of Commerce, must license shipments of certain export-controlled products that we export. These licenses are required due to both the products we export and to the foreign customers we service. If we do not receive a license for an export-controlled product, we cannot ship that product. We cannot be sure of our ability to gain any licenses required to export our products, and failure to receive a required license would eliminate our ability to make that sale. A delay in obtaining the necessary licenses to sell our export-controlled products abroad could result in delayed deliveries and delayed recognition of revenue, which could cause us reputational damage and could result in a customer’s decision not to do business with us in the future. We may also be subject to inquiries by such U.S. government agencies relating to issues involving the export-controlled products and services we export and failure to satisfactorily resolve such inquiries would adversely affect our business, results of operations and financial condition.

In addition to obtaining a license for certain of our exports outside of the United States, we are also required to maintain a standing registry under ITAR as an exporter. We operate as an exporter when we ship certain products to our customers outside the United States. If we were to lose our registration as an exporter under ITAR, we would not be able to sell export-controlled products abroad, which would adversely affect our business, results of operations and financial condition.

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Our operating margins may decline under our fixed-price contracts if we fail to accurately estimate the time and resources necessary to satisfy our obligations.

Approximately 72% of our revenues in 2012 were from fixed-price contracts under which we bear the risk of cost overruns. Our profits are adversely affected if our costs under these contracts exceed the assumptions we used in bidding for the contract. We may therefore need to absorb any increases in our supply costs and may not be able to pass such costs increases along to our customers. Sometimes we are required to fix the price for a contract before the project specifications are finalized, which increases the risk that we will incorrectly price these contracts. The complexity of many of our engagements makes accurately estimating the time and resources required more difficult.

We may not receive the full amounts estimated under the contracts in our total backlog, which could reduce our net sales in future periods below the levels anticipated and which makes backlog an uncertain indicator of future operating results.

As of December 31, 2012, our total backlog was $2,816.4 million. Orders may be cancelled and scope adjustments may occur, and we may not realize the full amounts of net sales that we may anticipate in our backlog numbers. There can be no assurance that the projects underlying the contracts and purchase orders will be placed or completed or that amounts included in our backlog ultimately will be billed and collected. Additionally, the timing of receipt of net sales, if any, on contracts included in our backlog could change. The failure to realize amounts reflected in our backlog could materially adversely affect our business, financial condition and results of operations in future periods.

We may be liable for civil or criminal penalties under a variety of complex laws and regulations, and changes in governmental regulations could adversely affect our business and financial condition.

Our businesses must comply with and are affected by various government regulations that impact our operating costs, profit margins and our internal organization and operation of our businesses. These regulations affect how we do business and, in some instances, impose added costs. Any changes in applicable laws could adversely affect our business and financial condition. Any material failure to comply with applicable laws could result in contract termination, price or fee reductions or suspension or debarment from contracting. The more significant regulations include:

· the Federal Acquisition Regulations (FAR) and all department and agency supplements, which comprehensively regulate the formation, administration and performance of U.S. government contracts;

· the Truth in Negotiations Act and implementing regulations, which require certification and disclosure of all cost and pricing data in connection with contract negotiations;

· the ITAR, which control the export and import of defense related articles and services on the United States Munitions Control List;

· laws, regulations and executive orders restricting the use and dissemination of information classified for national security purposes and the exportation of certain products and technical data;

· regulations of most state and regional agencies and foreign governments similar to those described above;

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· the trade sanctions laws and regulations administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control;

· the Foreign Corrupt Practices Act and the U.K. Bribery Act;

· the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Wall Street Reform and Protection Act;

· healthcare reform laws and regulations, including those enacted under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act of 2010; and

· tax laws and regulations in the U.S. and in other countries in which we operate;

· the civil False Claims Act, which provides for substantial civil penalties for violations, including for submission of a false or fraudulent claim to the U.S. government for payment or approval;

· the Procurement Integrity Act, which requires evaluation of ethical conflicts surrounding procurement activity and establishing certain employment restrictions for individuals who participate in the procurement process; and

· the Small Business Act and the Small Business Administration, or the “SBA,” size status regulations, which regulate eligibility for performance of government contracts which are set aside for, or a preference is given in the evaluation process if awarded to, specific types of contractors such as small businesses and minority-owned businesses.

The FAR and many of our U.S. government contracts contain organizational conflicts of interest clauses that may limit our ability to compete for or perform certain other contracts. Organizational conflicts of interest arise when we engage in activities that provide us with an unfair competitive advantage. A conflict of interest issue that precludes our competition for or performance on a significant program or contract could harm our prospects and negative publicity about a conflict of interest issue could damage our reputation.

In addition, the U.S. and foreign governments may revise existing contract rules and regulations or adopt new contract rules and regulations at any time and may also face restrictions or pressure regarding the type and amount of services it may obtain from private contractors. For instance, Congressional legislation and initiatives dealing with procurement reform and shifts in the buying practices of U.S. government agencies resulting from those proposals could have adverse effects on government contractors, including us. Any of these changes could impair our ability to obtain new contracts or renew contracts under which we currently perform when those contracts are eligible for recompetition. Any new contracting methods could be costly or administratively difficult for us to implement, which would adversely affect our business, results of operations and financial condition.

Our failure to identify, attract and retain qualified technical and management personnel could adversely affect our existing businesses, financial condition and results of operations.

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We may not be able to identify, attract or retain qualified technical personnel, including engineers, computer programmers and personnel with security clearances required for classified work, or management personnel to supervise such activities that are necessary for maintaining and growing our existing businesses, which could adversely affect our financial condition and results of operations. The technically complex nature of our operations results in difficulties finding qualified staff. In our defense businesses especially, experienced personnel possessing required security clearances are finite in number. A number of our employees maintain a top secret clearance level. Obtaining and maintaining security clearances for employees involves a lengthy process, and it is difficult to identify, recruit and retain employees who already hold security clearances. If our cleared employees lose or are unable to timely obtain security clearances or we lose a facility clearance, our U.S. government customers may terminate the contract or decide not to renew it upon its expiration. As a result, to the extent we cannot obtain or maintain the required security clearances for a particular contract, or we fail to obtain them on a timely basis, we may not generate the sales anticipated from the contract, which could harm our operating results. To the extent we are not able to obtain facility security clearances or engage employees with the required security clearances for a particular contract, we will be unable to perform that contract and we may not be able to compete for or win new awards for similar work.

We may incur significant costs in protecting our intellectual property which could adversely affect our profit margins. Our inability to obtain, maintain and enforce our patents and other proprietary rights could adversely affect our businesses’ prospects and competitive positions.

We seek to protect our proprietary technology and inventions through patents and other proprietary-right protection, and also rely on trademark laws to protect our brand. However, we may fail to obtain the intellectual property rights necessary to provide us with a competitive advantage, and any of our owned or licensed intellectual property rights could be challenged, invalidated, circumvented, infringed or misappropriated. We may also fail to apply for or obtain intellectual property protection in important foreign countries, and the laws of some foreign countries do not protect proprietary rights to the same extent as the laws of the United States. If we are unable to obtain or maintain these protections, we may not be able to prevent third parties from using our technology and inventions, which could adversely affect our business. We may incur significant expense in obtaining, maintaining, defending and enforcing our intellectual property rights. We may fail to take the actions necessary to enforce our intellectual property rights and even if we attempt to enforce such rights we may ultimately be unsuccessful, and such efforts may result in our intellectual property rights being challenged, limited in scope, or declared invalid or unenforceable. Also, some aspects of our business and services may rely on technologies and software developed by or licensed from third parties, and we may not be able to maintain our relationships with such third parties or enter into similar relationships in the future on reasonable terms or at all.

We also rely on trade secrets, proprietary know-how and continuing technological innovation to remain competitive. We have taken measures to protect our trade secrets and know-how, including seeking to enter into confidentiality agreements with our employees, consultants and advisors, but the measures we have taken may not be sufficient. For example, confidentiality agreements may not provide adequate protection or may be breached. We generally control and limit access to our product documentation and other proprietary information, but other parties may independently develop our know-how or otherwise obtain access to our technology, which could adversely affect our businesses’ prospects and competitive position.

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Assertions by third parties that we violate their intellectual property rights could have a material adverse effect on our business, financial condition and results of operations.

Third parties may claim that we, our customers, licensees or parties indemnified by us are infringing upon or otherwise violating their intellectual property rights. Such claims may be made by competitors seeking to obtain a competitive advantage or by other parties. Additionally, in recent years, individuals and groups have begun purchasing intellectual property assets for the purpose of making claims of infringement and attempting to extract settlements from companies like ours. Any claims that we violate a third party’s intellectual property rights can be time consuming and costly to defend and distract management’s attention and resources, even if the claims are without merit. Such claims may also require us to redesign affected products and services, enter into costly settlement or license agreements or pay costly damage awards, or face a temporary or permanent injunction prohibiting us from marketing or providing the affected products and services. Even if we have an agreement to indemnify us against such costs, the indemnifying party may be unable to uphold its contractual obligations. If we cannot or do not license the infringed technology on favorable terms or cannot or do not substitute similar technology from another source, our revenue and earnings could be adversely impacted.

We compete primarily for government contracts against many companies that are larger, better capitalized and better known than us. If we are unable to compete effectively, our business and prospects will be adversely affected.

Our businesses operate in highly competitive markets. Many of our competitors are larger, better financed and better known companies who may compete more effectively than we can. In order to remain competitive, we must keep our capabilities technically advanced and compete on price and on value added to our customers. Our ability to compete may be adversely affected by limits on our capital resources and our ability to invest in maintaining and expanding our market share. Consolidation in the industries in which we operate and government budget cuts have led to pressure being placed on the margins we may earn on any contracts we win. In addition, should the transportation market move towards requiring contractors to provide up-front financing for contracts they are awarded (for example, our contract for the Chicago Open Standards Fare System), we may need to compete more heavily on the basis of our financial strength, which may limit the contracts we can service at any one time.

The terms of our financing arrangements may restrict our financial and operational flexibility, including our ability to invest in new business opportunities.

We currently have unsecured borrowing arrangements. The terms of these borrowing arrangements include provisions that limit our levels of debt and require minimum levels of net worth and coverage of fixed charges. We may incur future obligations that would subject us to additional covenants that affect our financial and operational flexibility or subject us to different events of default. In addition, the cost of servicing such debt could divert resources which may otherwise be used to develop our businesses.

Our current $200.0 million unsecured revolving credit agreement expires in May 2017. The available line of credit on the agreement is reduced by any letters of credit issued under the agreement. As of December 31, 2012, there were borrowings of $25.0 million outstanding under the agreement, of which $5.0 million was repaid in February, 2013. Our borrowings under the agreement bear interest at a variable rate (1.6% at December 31, 2012). In addition, as of December 31, 2012, there were letters of credit outstanding under the agreement totaling $42.4 million, which reduced the available line of credit to $132.6 million at that date.

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We also have a secured letter of credit facility agreement with a bank that expires in March 2013. We are currently negotiating an extension of the agreement for approximately one year. As of December 31, 2012 there were letters of credit outstanding under this agreement of $63.4 million. In support of this facility, we placed $68.8 million of our cash on deposit in the U.K. as collateral in a restricted account with the bank providing the facility. We are required to leave the cash in the restricted account so long as the bank continues to maintain associated letters of credit under the facility. The maximum amount of letters of credit currently allowed by the facility is $66.8 million, and any increase above this amount would require bank approval and additional restricted funds to be placed on deposit. We may choose at any time to terminate the facility and move the associated letters of credit to another credit facility. Letters of credit outstanding under this facility do not reduce the available line of credit available under the revolving credit agreement described above.

Our development contracts may be difficult for us to comply with and may expose us to third-party claims for damages.

We are often party to government and commercial contracts involving the development of new products and systems. These contracts typically contain strict performance obligations and project milestones. We cannot assure you we will comply with these performance obligations or meet these project milestones in the future. If we are unable to comply with these performance obligations or meet these milestones, our customers may terminate these contracts and, under some circumstances, recover damages or other penalties from us. If other parties elect to terminate their contracts or seek damages from us, it could materially harm our business and negatively impact our stock price.

Our revenues could be less than expected if we are not able to deliver services or products as scheduled due to disruptions in supply.

Since our internal manufacturing capacity is limited, we use contract manufacturers. While we use care in selecting our manufacturers, we have less control over the reliability of supply, quality and price of products or components than if we manufactured them. In some cases, we obtain products from a sole supplier or a limited group of suppliers. Consequently, we risk disruptions in our supply of key products and components if our suppliers fail or are unable to perform because of shortages in raw materials, operational problems, strikes, natural disasters, financial condition or other factors. We may have disputes with our vendors arising from, among other things, the quality of products and services or customer concerns about the vendor. If any of our vendors fail to timely meet their contractual obligations or have regulatory compliance or other problems, our ability to fulfill our obligations may be jeopardized. Economic downturns can adversely affect a vendor’s ability to manufacture or deliver products. Further, vendors may also be enjoined from manufacturing and distributing products to us as a result of litigation filed by third parties, including intellectual property litigation. If we were to experience difficulty in obtaining certain products, there could be an adverse effect on our results of operations and on our customer relationships and our reputation. Additionally, our key vendors could also increase pricing of their products, which could negatively affect our ability to win contracts by offering competitive prices.

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Any material supply disruptions could adversely affect our ability to perform our obligations under our contracts and could result in cancellation of contracts or purchase orders, penalties, delays in realizing revenues, payment delays, as well as adversely affect our ongoing product cost structure.

Our future success will depend on our ability to develop new products, systems and services that achieve market acceptance in our current and future markets.

Both our commercial and government businesses are characterized by rapidly changing technologies and evolving industry standards. Accordingly, our performance depends on a number of factors, including our ability to:

· identify emerging technological trends in our current and target markets;

· develop and maintain competitive products, systems and services;

· enhance our offerings by adding technological innovations that differentiate our products, systems and services from those of our competitors; and

· develop, manufacture and bring to market cost-effective offerings quickly.

We believe that, in order to remain competitive in the future, we will need to continue to develop new products, systems and services, which will require the investment of significant financial resources. The need to make these expenditures could divert our attention and resources from other projects, and we cannot be sure that these expenditures ultimately will lead to the timely development of new products, systems or services. We currently spend approximately 1 to 2% of our annual net sales on R&D efforts, primarily in our Cubic Defense Systems (CDS) and Cubic Transportation Systems (CTS) segments. There can be no assurances that this percentage will not increase should we require increased innovations to successfully compete in the markets we serve. We may also experience delays in completing development and introducing certain new products, systems or services in the future due to their design complexity. Any delays could result in increased costs of development or redirect resources from other projects. In addition, we cannot provide assurances that the markets for our products, systems or services will develop as we currently anticipate, which could significantly reduce our revenue and harm our business. Furthermore, we cannot be sure that our competitors will not develop competing products, systems or services that gain market acceptance in advance of ours, or that cause our existing products, systems or services to become non-competitive or obsolete, which could adversely affect our results of operations.

If we deliver products or systems with defects, our reputation will be harmed, revenue from, and market acceptance of, our products and systems will decrease and we could expend significant capital and resources as a result of such defects.

Our products and systems are complex and frequently operate in high-performance, challenging environments. Notwithstanding our internal quality specifications, our products and systems have sometimes contained errors, defects and bugs when introduced. If we deliver products or systems with errors, defects or bugs, our reputation and the market acceptance and sales of our products and systems would be harmed. Further, if our products or systems contain errors, defects or bugs, we may be required to expend significant capital and resources to alleviate such problems and incur significant costs for product recalls and inventory write-offs. Defects could also lead to product liability lawsuits against us or against our customers, and could also damage our reputation. We have agreed to indemnify our customers in some circumstances against liability arising from defects in our products and systems. In the event of a successful product liability claim, we could be obligated to pay damages significantly in excess of our product liability insurance limits.

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We face certain significant risk exposures and potential liabilities that may not be covered adequately by insurance or indemnity.

We are exposed to liabilities that are unique to the products and services we provide. A significant portion of our business relates to designing, developing, manufacturing, operating and maintaining advanced defense and transportation systems and products. New technologies associated with these systems and products may be untested or unproven. In addition, certain activities in connection with which our training systems are used or our services are provided are inherently dangerous. While in some circumstances we may receive indemnification from U.S. and foreign governments, and we maintain insurance for certain risks, the amount of our insurance or indemnity may not be adequate to cover all claims or liabilities, and we may be forced to bear substantial costs from an accident or incident. It also is not possible for us to obtain insurance to protect against all operational risks and liabilities. Substantial claims resulting from an incident in excess of the indemnification we receive and our insurance coverage would harm our financial condition, results of operations and cash flows. Moreover, any accident or incident for which we are liable, even if fully insured, could negatively affect our standing with our customers and the public, thereby making it more difficult for us to compete effectively, and could significantly impact the cost and availability of adequate insurance in the future.

We may acquire other companies, which could increase our costs or liabilities or be disruptive to our business.

Part of our strategy involves the acquisition of other companies. For example, in December 2012, we acquired the operating assets of NEK Special Programs Group, LLC, a special operation forces training business, including more than 200 operational and technical experts. We cannot assure you that we will be able to integrate acquired companies successfully without substantial expense, delay or operational or financial problems. Such expenses, delays or operational or financial problems may include the following:

· we may need to divert management resources to integration, which may adversely affect our ability to pursue other more profitable activities;

· integration may be difficult as a result of the necessity of coordinating geographically separated organizations, integrating personnel with disparate business backgrounds and combining different corporate cultures;

· we may not be able to eliminate redundant costs anticipated at the time we select acquisition candidates; and

· one or more of our acquisition candidates may have unexpected liabilities, fraud risk, or adverse operating issues that we fail to discover through our due diligence procedures prior to the acquisition.

As a result, the integration of acquired businesses may be costly and may adversely impact our results of operations and financial condition.

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Our employees may engage in misconduct or other improper activities, which could harm our business, financial condition and results of operations.

We are exposed to the risk of employee fraud or other misconduct. Employee misconduct could include intentionally failing to comply with U.S. government procurement regulations, engaging in unauthorized activities, attempting to obtain reimbursement for improper expenses, or submitting falsified time records, which could result in legal proceedings against us, lost contracts or reduced revenues. For example, see “Item 3. Legal Proceedings” of our Annual Report on Form 10-K for the year ended September 30, 2012 for a discussion of certain litigation relating to misconduct by one of our former employees. Employee misconduct could also involve improper use of our customers’ sensitive or classified information, which could result in regulatory sanctions against us and serious harm to our reputation. It is not always possible to deter employee misconduct, and the precautions we take to prevent and detect this activity may not be effective in controlling unknown or unmanaged risks or losses, which could harm our business, financial condition and results of operations. In addition, alleged or actual employee misconduct could result in investigations or prosecutions of employees engaged in the subject activities, which could result in unanticipated consequences or expenses and management distraction for us regardless of whether we are alleged to have any responsibility.

The funding and costs associated with our pension plans may cause our earnings, cash flows, and shareholders’ equity to fluctuate significantly from year to year.

Certain of our employees in the U.S. are covered by a noncontributory defined benefit pension plan and approximately one-half of our European employees are covered by a contributory defined benefit pension plan. The impact of these plans on our GAAP earnings may be volatile in that the amount of expense we record for our pension plans may materially change from year to year because those calculations are sensitive to changes in several key economic assumptions, including discount rates, inflation, salary growth, expected return on plan assets, retirement rates and mortality rates. Changes in these factors affect our plan funding, cash flows, earnings, and shareholders’ equity.

In recent years, we have taken certain actions to mitigate the effect of our defined benefit pension plans on our financial results. For example, benefits under the U.S. plan were frozen as of December 31, 2006, so no new benefits have accrued after that date, and benefits under the European plan were frozen as of September 30, 2010, though the European plan is a final pay plan, which means that benefits will be adjusted for increases in the salaries of participants until their retirement or departure from the company. U.S. and European employees hired subsequent to the dates of freezing of the respective plans are not eligible for participation in the defined benefit plans. For more information on how these factors could impact earnings, cash flows and shareholders’ equity, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies, Estimates and Judgments—Pension Costs” in our Annual Report on Form 10-K for the year ended September 30, 2012.

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Risks Relating to Our Common Stock and the Securities Markets

The price of our common stock may fluctuate significantly, and you could lose all or part of your investment.

Our common stock has traded as high as $57.75 and as low as $37.16 since October 1, 2010. An active, liquid and orderly market for our common stock may not be sustained, which could depress the trading price of our common stock. The market price of our common stock could fluctuate significantly for various reasons, which include:

· our quarterly or annual earnings or those of our competitors;

· the public’s reaction to our press releases, our other public announcements and our filings with the Securities and Exchange Commission;

· changes in earnings estimates or recommendations by research analysts who track our common stock or the stocks of our competitors;

· new laws or regulations or new interpretations of laws or regulations applicable to our business;

· changes in accounting standards, policies, guidance, interpretations or principles;

· changes in general conditions in the domestic and global economies or financial markets, including those resulting from war, incidents of terrorism or responses to such events;

· litigation involving our company or investigations or audits by regulators into the operations of our company or our competitors;

· strategic action by our competitors; and

· sales of common stock by our directors, executive officers and significant shareholders.

In addition, the stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors may seriously affect the market price of our common stock, regardless of actual operating performance. In addition, in the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. If litigation is instituted against us, it could result in substantial costs and a diversion of our management’s attention and resources.

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Our Executive Chairman of the Board of Directors beneficially owns a large percentage of our common stock and as a result can exert significant influence over us.

As of December 31, 2012, Walter C. Zable, our Executive Chairman of the Board of Directors, and Karen Zable Cox, Mr. Zable’s sister, beneficially owned an aggregate of 9,257,526 shares, or approximately 34.6%, of our common stock. Of these shares, an aggregate of 8,826,396 shares, or approximately 33.0% of our common stock, were owned by trusts, of which Mr. Zable and Ms. Cox are co-trustees. In their capacities as co-trustees, Mr. Zable and Ms. Cox share voting and dispositive power over the shares owned by such trusts. Accordingly, Mr. Zable and Ms. Cox may be able to substantially influence all matters requiring approval by our shareholders, including the election of directors and the approval of mergers or other business combination transactions. Circumstances may arise in which the interests of these shareholders could conflict with the interests of our other shareholders. These shareholders could delay or prevent a change in control of Cubic even if such a transaction would be beneficial to our other shareholders.

Your percentage ownership in us may be diluted by future issuances of capital stock, which could reduce your influence over matters on which shareholders vote.

Our board of directors has the authority, without action or vote of our shareholders, to issue all or any part of our authorized but unissued shares of common stock, including shares issuable upon the exercise of options, shares that may be issued in the future under our 2005 Equity Incentive Plan or shares of our authorized but unissued preferred stock. Issuances of common stock or preferred voting stock could reduce your influence over matters on which our shareholders vote and, in the case of issuances of preferred stock, likely could result in your interest in us being subject to the prior rights of holders of that preferred stock.

Provisions in our charter documents and Delaware law could delay or prevent a change in control of Cubic.

Provisions of our amended and restated certificate of incorporation and amended and restated bylaws may discourage, delay or prevent a merger, acquisition or other change in control that shareholders may consider favorable, including transactions in which shareholders might otherwise receive a premium for their shares. In addition, these provisions may frustrate or prevent any attempt by our shareholders to replace or remove our current management by making it more difficult to replace or remove our board of directors. These provisions include:

· prior to the date of the transaction, an affirmative vote of the holders of at least 66-2/3% of our outstanding common stock is required for the approval, adoption or authorization of a business combination;

· a prohibition on shareholder action through written consent;

· a requirement that special meetings of shareholders be called only by our board of directors or by a committee of our board of directors that has been duly designated to do so by our board of directors;

· the authority of our board of directors to issue preferred stock with such terms as our board of directors may determine; and

· a requirement for the affirmative vote of the holders of at least 66-2/3% of the total voting power of all outstanding shares of our voting stock to amend our amended and restated bylaws, or to amend specific provisions of our amended and restated certificate of incorporation.

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In addition, Delaware law prohibits a publicly held Delaware corporation from engaging in a business combination with an interested shareholder, generally a person who, together with its affiliates, owns or within the last three years has owned 15% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested shareholder, unless the business combination is approved in a prescribed manner. Accordingly, Delaware law may discourage, delay or prevent a change in control of our company.

If we are unable to pay semiannual dividends at the targeted level, our reputation and stock price may be harmed.

In August 2012, our board of directors approved a semiannual dividend on common stock of $0.12 per share. We have paid uninterrupted semiannual dividends to our shareholders since 1971, and, in fiscal 2012, we paid $6.4 million of cash dividends to our shareholders.

The dividend program requires the use of a portion of our cash flows. Our ability to continue to pay semiannual dividends will depend on our ability to generate sufficient cash flows from operations in the future. This ability may be subject to certain economic, financial, competitive and other factors that are beyond our control. Our board of directors may, at its discretion, decrease the targeted semiannual dividend amount or entirely discontinue the payment of dividends at any time. Any failure to pay dividends after we have announced our intention to do so may adversely affect our reputation and investor confidence in us, and negatively impact our stock price.

If securities or industry analysts cease to publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of the analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.

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ITEM 6 - EXHIBITS

(a) The following exhibits are included herein:

Exhibit No.		Description
3.1		Amended and Restated Certificate of Incorporation. Incorporated by reference to Form 10-Q filed for the quarter ended June, 30, 2006, file No. 001-08931, Exhibit 3.1.
3.2		Amended and Restated Bylaws. Incorporated by reference to Form 10-K filed for the fiscal year ended September 30, 2010, file No. 001-08931, Exhibit 3.2.
10.1*		Amended and Restated Deferred Compensation Plan dated January 1, 2013. Attached hereto as Exhibit 10.1.
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350
32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350
101		Financial statements from the Cubic Corporation Quarterly Report on Form 10-Q for the quarter ended December 31, 2012, formatted in Extensible Business Reporting Language (XBRL): (i) Condensed Consolidated Statements of Income, (ii) Condensed Consolidated Statements of Comprehensive Income, (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements.

* Indicates management contract or compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		CUBIC CORPORATION

Date	February 11, 2013	/s/ John D. Thomas
		John D. Thomas
			Executive Vice President and Chief Financial Officer
			(Principal Financial Officer)


Date	February 11, 2013	/s/ Mark A. Harrison
		Mark A. Harrison
			Senior Vice President and Corporate Controller
			(Principal Accounting Officer)

Exhibit 10.1

CUBIC CORPORATION

2005 DEFERRED COMPENSATION PLAN

EFFECTIVE JANUARY 1, 2005,

AMENDED AND RESTATED JANUARY 1, 2013

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		Page

ARTICLE 1 Definitions		1

1.1	“ Account Balance”	1
1.2	“Annual Deferral Amount”	1
1.3	“Annual Installment Method”	1
1.4	“Base Annual Salary”	2
1.5	“Beneficiary”	2
1.6	“Beneficiary Designation Form”	2
1.7	“Board”	2
1.8	“Bonus”	2
1.9	“Change in Control”	2
1.10	“Claimant”	3
1.11	“Code”	3
1.12	“Committee”	3
1.13	“Company”	3
1.14	“Compensation”	3
1.15	“Deferral Account”	3
1.16	“Deferral Amount”	3
1.17	“Director”	3
1.18	“Director Fees”	3
1.19	“Disability”	3
1.20	“Distribution Date”	3
1.21	“Election Form”	4
1.22	“Employee”	4
1.23	“Employers”	4
1.24	“ERISA”	4
1.25	“Fiscal Year”	4
1.26	“Inactive Participant”	4
1.27	“In-Service Distribution”	4
1.28	“Key Employee”	4
1.29	“Participant”	4

1.30	“Plan”	4
1.31	“Plan Agreement”	4
1.32	“Plan Year”	5
1.33	“Re-Deferral Election”	5
1.34	“Separation from Service”	5
1.35	“Termination Benefit”	5
1.36	“Unforeseeable Financial Emergency”	5

ARTICLE 2 Eligibility, Selection, Enrollment		5

2.1	Selection by Committee	5
2.2	Enrollment Requirements	5
2.3	Termination of Participation and/or Deferrals	5

ARTICLE 3 Deferral Elections/Crediting of Interest		6

3.1	Deferred Compensation	6
3.2	Election to Defer Compensation	6
3.3	Time and Form of Payment	7
3.4	Withholding of Deferral Amounts	8
3.5	Interest	8
3.6	FICA and Other Taxes	8
3.7	Vesting	8

ARTICLE 4 In-Service Distribution; Unforeseeable Financial Emergencies		8

4.1	In-Service Distribution	8
4.2	Withdrawal Payout/Suspensions for Unforeseeable Financial Emergencies	9

ARTICLE 5 Termination Benefit		9

5.1	Termination Benefits	9
5.2	Payment of Termination Benefit	9

ARTICLE 6 Death Benefit		10

6.1	Death Prior to Distribution of Account Balance	10

ARTICLE 7 Disability		10

7.1	General	10

ARTICLE 8 Beneficiary Designation		10

8.1	Beneficiary	10
8.2	Beneficiary Designation; Change; Spousal Consent	10
8.3	Acknowledgement	11

8.4	No Beneficiary Designation	11
8.5	Doubt as to Beneficiary	11
8.6	Discharge of Obligations	11

ARTICLE 9 Termination, Amendment, or Modification		11

9.1	Termination	11
9.2	Amendment	11
9.3	Effect of Payment	12

ARTICLE 10 Administration		12

10.1	Committee Duties	12
10.2	Agents	12
10.3	Binding Effect of Decisions	12
10.4	Indemnity of Committee	12
10.5	Employer Information	12
10.6	Electronic Administration	13

ARTICLE 11 Claims Procedure		13

11.1	Presentation of Claim	13
11.2	Notification of Decision	13
11.3	Requests for a Review of a Denied Claim	14
11.4	Decision on Review	14
11.5	Rules and Procedures	15
11.6	Exhaustion of Remedies	15
11.7	Optional Arbitration	15

ARTICLE 12 Miscellaneous		17

12.1	Unsecured General Creditor	17
12.2	Employer’s Liability	17
12.3	Non-Assignability	17
12.4	Coordination with Other Benefits	17
12.5	Not a Contract of Employment	18
12.6	Furnishing Information	18
12.7	Terms	18
12.8	Captions	18
12.9	Governing Law	18
12.10	Notice	18

iii

12.11	Successors	18
12.12	Spouse’s Interest	19
12.13	Validity	19
12.14	Incompetent	19
12.15	Court Order	19
12.16	Effect on Employee Benefits	19
12.17	Legal Fees to Enforce Rights Upon a Change in Control	19
12.18	Code Section 409A	20

PURPOSE

The purpose of this Plan is to provide specified benefits to a select group of management or highly compensated employees, or independent directors, who contribute materially to the continued growth, development and future business success of Cubic Corporation, a Delaware corporation, and its subsidiaries, if any. This Plan shall be unfunded for tax purposes and for purposes of Title I of ERISA, and is intended to comply, in form and operation, with the requirements of Code Section 409A so as to avoid the inclusion of deferred compensation in the gross income of participants until actual receipt. In the event of any inconsistency between the provisions of the Plan and the requirements of Code Section 409A, as interpreted by the Treasury Department and the Internal Revenue Service in guidance issued thereunder, the provisions of the Plan shall be applied in a manner consistent with the requirements of Section 409A.

In order to transition to the requirements of Code Section 409A and related Treasury Regulations, the Committee may make available to Participants certain transition relief provided under Treasury guidance as described more fully in Appendix A of this Plan.

This Plan has been adopted by the Board of Directors of Cubic Corporation effective January 1, 2005, as a successor to the Cubic Corporation Restated Deferred Compensation Plan for Designated Directors, Officers and Key Employees (the “Prior Plan”). The provisions of the Prior Plan shall continue to apply to the deferred compensation account balances earned and vested under the Prior Plan as of December 31, 2004, and subsequent earnings thereon, to the extent such amounts are not subject to Section 409A. The provisions of this Plan shall supersede the provisions of the Prior Plan with respect to amounts deferred after December 31, 2004, that are subject to Section 409A.

ARTICLE 1

Definitions

For purposes hereof, unless otherwise clearly apparent from the context, the following phrases or terms shall have the following indicated meanings:

1.1 “ Account Balance ” shall mean, with respect to a Participant, the balance of his or her Deferral Account. This account shall be a bookkeeping entry only and shall be utilized solely as a device for the measurement and determination of the amounts to be paid to or in respect of a Participant pursuant to the Plan.

1.2 “ Annual Deferral Amount ” shall mean that portion of a Participant’s Base Annual Salary or Bonus, or Director Fees, that a Participant elects to have, and is, deferred in accordance with Article 3 for any one Plan Year or Fiscal Year, as applicable. An Annual Deferral Amount shall also mean that portion of a Participant’s Bonus payable with respect to more than one Fiscal Year which a Participant elects to have, and is, deferred under the Plan.

1.3 “ Annual Installment Method ” shall mean the payment of a Participant’s benefit in annual installments to be paid, if so elected by a Participant, as follows: (i) during the calendar year in which payment begins, such payment shall equal (a) the Account Balance as of the Termination Date; divided by (b) the total number of installment payments to be made; and

(ii) during the benefit payment period, the amount of each installment to be paid during each calendar year thereafter shall be recalculated, and shall be equal to (a) the remaining amount payable to the Participant as of such January 1; divided by (b) the number of installment payments to be made in or after such subsequent calendar year. The first such installment shall be made as of the Termination Date and subsequent installments shall be made on the 15 th of the first January following the Termination Date and subsequent installments shall be made on the 15 th of each subsequent January of each subsequent calendar year. The final installment payment shall be equal to the remaining amount payable to the Participant. In no event shall the amount of any installment payment exceed the remaining amount payable to the Participant.

1.4 “ Base Annual Salary ” shall mean the annual compensation (excluding bonuses, commissions, overtime, incentive payments, non-monetary awards, stock options and grants, restricted stock, severance or termination payments, foreign service payments, payments for consulting services, and such other unusual or extraordinary payments as the Committee may determine) paid to a Participant for services rendered to any Employer, before reduction for compensation deferred pursuant to all tax-qualified, non-qualified and Code Section 125 plans (other than compensation deferred under individual employment contracts) of any Employer. The Committee may, in its discretion, with respect to any one or more Participants establish for any Plan Year a limit on the amount of Base Annual Salary to be taken into account under this Plan.

1.5 “ Beneficiary ” shall mean one or more persons, trusts, estates or other entities, designated in accordance with Article 8, that are entitled to receive benefits under the Plan upon death of a Participant.

1.6 “ Beneficiary Designation Form ” shall mean the form established from time to time by the Committee that a Participant completes, signs, and returns to the Committee to designate one or more Beneficiaries.

1.7 “ Board ” shall mean the Board of Directors of the Company.

1.8 “ Bonus ” shall mean any compensation, in addition to Base Annual Salary, paid in respect of one or more Fiscal Years to a Participant as an Employee under the Company’s Bonus Plan, or any other incentive plan of the Company. The Committee may, in its discretion, with respect to any one or more Participants establish for any Fiscal Year or Years a limit on the amount of Bonus to be taken into account under this Plan.

1.9 “ Change in Control ” shall mean a change in ownership or control of the Company effected through any of the following transactions: (i) a merger, consolidation or other reorganization approved by the Company’s stockholders, UNLESS securities representing fifty percent (50%) or more of the total combined voting power of the voting securities of the successor corporation are immediately thereafter beneficially owned, directly or indirectly and in substantially the same proportion, by the persons who beneficially owned the Company’s outstanding voting securities immediately prior to such transaction; (ii) the sale, transfer or other disposition of all or substantially all of the Company’s assets in complete liquidation or dissolution of the Company; or (iii) the acquisition, directly or indirectly by any person or related group of persons (other than the Company or a person that directly or indirectly controls, is

controlled by, or is under common control with, the Company), of beneficial ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended from time to time), of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities.

1.10 “ Claimant ” shall have the meaning set forth in Section 11.1.

1.11 “ Code ” shall mean the Internal Revenue Code of 1986, as amended.

1.12 “ Committee ” shall mean the administrative committee appointed to manage and administer the Plan in accordance with its provisions pursuant to Article 10.

1.13 “ Company ” shall mean Cubic Corporation, a Delaware corporation.

1.14 “ Compensation ” refers to Base Annual Salary and Bonus, and Director Fees, as may be designated by the Committee.

1.15 “ Deferral Account ” shall mean the sum of (a) a Participant’s Deferral Amount, plus (b) interest credited in accordance with Section 3.5, net of all distributions from such Account. This account shall be a bookkeeping entry only and shall be utilized solely as a device for the measurement and determination of the amounts to be paid to the Participant pursuant to the Plan.

1.16 “ Deferral Amount ” shall mean the sum of all of a Participant’s Annual Deferral Amounts.

1.17 “ Director ” shall mean a non-employee member of the Board.

1.18 “ Director Fees ” shall mean retainer fees and meeting fees payable to Directors. The Committee may, in its discretion, with respect to any one or more Participants, establish for any Plan Year a limit on the amount of Director Fees taken into account under this Plan.

1.19 “ Disability ” shall mean a Participant is (1) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (2) by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Employer.

1.20 “ Distribution Date ” shall mean the date or dates on which Compensation being deferred will be distributed, as selected by the Participant on the Election Form. The term Distribution Date does not include other dates on which amounts may be distributed to a Participant under the Plan such as upon Disability, death, Unforeseeable Financial Emergency, or Separation from Service.

1.21 “ Election Form ” shall mean the form established from time to time by the Committee that a Participant completes, signs, and returns to the Committee to make an election under the Plan.

1.22 “ Employee ” refers to any employee, within the meaning of Section 3121(d) of the Code, who is highly compensated, has the title of Vice President, President or Chief Executive Officer, or is otherwise a member of management, selected by the Committee to participate in this Plan. The Committee shall determine whether an employee is to be considered highly compensated, applying a definition with a dollar threshold at least as high as that set under Section 414(q) of the Code from time to time with respect to qualified plans.

1.23 “ Employers ” shall mean the Company and/or any of its subsidiaries that have been selected by the Board to participate in the Plan.

1.24 “ ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time.

1.25 “ Fiscal Year ” shall mean the Employer’s tax year, which is currently the 12-month period ending on September 30.

1.26 “ Inactive Participant ” shall mean any Participant who has elected to defer Compensation under the Plan during a previous Plan Year but who does not defer any Compensation payable during the current Plan Year.

1.27 “ In-Service Distribution ” shall mean the payout set forth in Section 4.1.

1.28 “Key Employee ” shall mean an employee as defined in Code Section 416(i) without regard to paragraph (5) thereof.

1.29 “ Participant ” shall mean any Employee or Director (a) who is selected to participate in the Plan, (b) who elects to participate in the Plan, (c) who signs a Plan Agreement and an Election Form, (d) whose signed Plan Agreement and Election Form are accepted by the Committee, (e) who commences participation in the Plan, and (f) whose Plan Agreement has not terminated.

1.30 “ Plan ” shall mean the Company’s 2005 Deferred Compensation Plan which shall be evidenced by this instrument and, with respect to each Participant, by his or her Plan Agreement, as each may be amended from time to time.

1.31 “ Plan Agreement ” shall mean a written agreement, as may be amended from time to time, which is entered into by and between one or more Employers and a Participant. Each Plan Agreement executed by a Participant shall provide for the entire benefit to which such Participant is entitled under the Plan, and shall specify the Employer or Employers liable for the Participant’s benefits hereunder and the magnitude or extent of such liability. The Plan Agreement bearing the latest date of acceptance by the Committee shall govern such entitlement and each Employer’s liability. Upon the complete payment of a Participant’s Account Balance, each individual’s Plan Agreement and his or her status as a Participant shall terminate.

1.32 “ Plan Year ” shall be the calendar year, starting with 2005.

1.33 “ Re-Deferral Election ” shall mean a Participant’s irrevocable election to extend a Distribution Date.

1.34 “Separation from Service ” means a termination of employment or service that constitutes a “separation from service” within the meaning of Code Section 409A(a)(2)(A)(i). A Separation from Service shall not occur merely by reason of the transfer of employment of a Participant from an Employer to any entity directly or indirectly controlled by or under common control with the Company and which is not an Employer, unless otherwise provided under Section 409A. A Participant will not be considered to have a termination of employment while the individual is on a military leave, sick leave, or other bona fide leave of absence if the period of the leave does not exceed six months or, if longer, so long as the individual’s right to reemployment with the Employer is provided either by statute or by contract.

1.35 “ Termination Benefit ” shall mean the benefit set forth in Article 7.

1.36 “ Unforeseeable Financial Emergency ” shall mean an “unforeseeable emergency” within the meaning of Section 409A(2)(B)(ii) of the Code, including a severe financial hardship to the Participant resulting from illness or accident of the Participant, the Participant’s spouse or a dependent (as defined in Section 152(a) of the Code) of the Participant, loss of the Participant’s property due to casualty or other similar extraordinary unforeseeable circumstances arising as a result of events beyond the control of the Participant. Further, to qualify for distribution on account of an “Unforeseeable Emergency,” the amounts distributed with respect to the unforeseeable emergency cannot exceed the amounts necessary to satisfy the emergency and pay taxes reasonably anticipated as a result of the distribution. The amount needed is determined after taking into account amounts that would be received by the Participant through reimbursement or compensation by insurance or otherwise, or that could be obtained, without severe financial hardship, through the liquidation of the Participant’s assets.

ARTICLE 2

Eligibility, Selection, Enrollment

2.1 Selection by Committee . Participation in the Plan shall be limited to employees of an Employer who are part of a select group of management or highly compensated employees, and non-employee members of the Board of Directors of the Company. From the foregoing, the Committee shall select, in its sole and absolute discretion, individuals eligible to participate in the Plan.

2.2 Enrollment Requirements . As a condition to participation, each selected individual shall complete, execute, and return to the Committee a Plan Agreement and an Election Form. In addition, the Committee shall establish from time to time such other enrollment requirements as it determines in its sole and absolute discretion are necessary.

2.3 Termination of Participation and/or Deferrals . If the Committee determines in its sole discretion that a Participant no longer meets the requirement of Section 2.1 hereof, the Committee shall prevent the Participant from making future deferral elections.

ARTICLE 3

Deferral Elections/Crediting of Interest

3.1 Deferred Compensation.

(a) Minimum . For each Plan Year or Fiscal Year, as applicable, a Participant may elect to defer Compensation paid in respect of such year the following minimum amounts for each deferral elected:

Deferral	Minimum Amount

Base Annual Salary		1% per Plan Year

Annual Bonus		5% per Fiscal Year

Director Fees		1% per Plan Year

If no election is made, the amount deferred shall be zero.

(b) Short Plan Year . If a Participant first becomes a Participant after the first day of a Plan Year, the minimum Base Annual Salary or Director Fees shall be an amount equal to the minimum set forth above, multiplied by a fraction, the numerator of which is the number of complete months remaining in the Plan Year and the denominator of which is 12.

(c) Maximum . For each Plan Year or Fiscal Year, as applicable, a Participant may elect to defer Base Annual Salary and/or Bonus up to the following maximum amounts:

Deferral	Maximum Amount

Base Annual Salary		90% per Plan Year

Bonus		100% per Fiscal Year

Director Fees		100% per Plan Year

3.2 Election to Defer Compensation .

(a) General . An individual selected to participate must deliver to the Committee a completed and signed Election Form, which Election Form must be accepted by the Committee, for a valid election to exist. Except as otherwise provided under this Section 3.2, an election to defer Compensation must be made and accepted (i) no later than the close of the Plan Year preceding the Plan Year in which any of the services for which the Compensation would be paid are performed, or (ii) within 30 days after the date the Participant first becomes eligible to participate in this Plan (and any other plan that would be aggregated with the Plan to the extent required under Section 409A), with respect to services to be performed subsequent to the election.

(b) Special Rule for First Year of Eligibility . For purposes of Section 3.2(a) above, and to the extent permitted under Section 409A, if a deferral election is made with respect to a Bonus during the first year of eligibility, but after the beginning of the service period with respect to which the Bonus is payable, the election is deemed to apply to compensation paid for services performed subsequent to the election if the election applies to a portion of the Bonus that is no greater than the total amount of the Bonus for the performance period multiplied by the ratio of the number of days remaining in the performance period after the election over the total number of days in the performance period.

(c) Special Rule for Fiscal Year Compensation . To the extent permitted under Section 409A, the Committee may permit a Participant to defer a Bonus based on service to be performed during one or more consecutive Fiscal Years by making an election no later than the close of the Fiscal Year preceding the first Fiscal Year in which the services for which the Bonus is payable are to be performed, provided that no portion of the Bonus is paid or payable during the Fiscal Year(s) in which the services are to be performed.

(d) Special Rule for Performance-Based Compensation . The Committee may permit a Participant to make an initial election to defer a Bonus based on a performance period of one or more Fiscal Years, provided that the Participant has performed services continuously from the date the performance criteria were established through the date of the election, on any date that is at least six months prior to the end of the performance period and before the Bonus has become both substantially certain to be paid and readily ascertainable. This Section 3.2(e) shall apply only to the extent the Bonus qualifies as “performance-based compensation” within the meaning of Section 409A(a)(4)(B)(iii) of the Code and as otherwise permitted under Section 409A.

(e) Subsequent Elections . For each service period (that is, a Plan Year or one or more consecutive Fiscal Years with respect to which a Bonus is payable), a new Election Form must be delivered to the Committee in accordance with its rules and procedures and the requirements of this Section 3.2. If no Election Form is timely delivered for a service period, no Annual Deferral Amount shall be withheld for that service period. Notwithstanding the foregoing, the Committee may provide that deferral elections shall remain in effect with respect to subsequent service periods until changed or revoked, provided that the elections become irrevocable with respect to compensation for service performed in a service period as of the last day on which the Participant would be required to make a deferral election for that service period.

3.3 Time and Form of Payment . At the time of each election to defer an Annual Deferral Amount, the Committee may permit the Participant to elect the time and form of payment of the Annual Deferral Amount in accordance with the provisions of Section 4.1, with respect to In-Service Distributions, and in accordance with such other rules and procedures as the Committee may prescribe consistent with the requirements of Section 409A of the Code with respect to a payment method for Termination Benefits. The Committee may permit the Participant to change an election of a payment method for Termination Benefits by submitting a new Election Form to the Committee, provided that any such Election Form is submitted at least 12 months prior to the scheduled payment date and is not effective for 12 months, and the first payment with respect to which the election is made is deferred for a period of not less than five

years from the earliest date such payment would otherwise have been made or commenced if payable in installments (unless payment is on account of death, Disability or Unforeseeable Financial Emergency), subject to compliance with Code Section 409A.

3.4 Withholding of Deferral Amounts . For each Plan Year, the Base Annual Salary portion of the Annual Deferral Amount shall be withheld each payroll period in equal amounts or percentages from the Participant’s Base Annual Salary. The Bonus portion of the Annual Deferral Amount shall be withheld at the time the Bonus is or otherwise would be paid to the Participant. The Director Fees portion of the Annual Deferral Amount shall be withheld at the time that Director Fees are or otherwise would be paid to the Participant. The Annual Deferral Amount shall be credited to the Participant’s Deferral Account. A Participant shall at all times have a fully vested and non-forfeitable interest in his or her Deferral Account.

3.5 Interest . The Committee shall credit the Account Balances monthly with an interest rate of return equal to the “Prompt Payment Act” interest rate set by the Secretary of the Treasury semi-annually on January 1 st and July 1 st , divided by 12. The crediting of interest shall be for bookkeeping purposes only, and the Company shall not be obligated actually to invest any money credited to the Account Balances.

3.6 FICA and Other Taxes . For each Plan Year in which an Annual Deferral Amount is being withheld, the Participant’s Employer(s) shall ratably withhold from that portion of the Participant’s Base Annual Salary and/or Bonus that is not being deferred, the Participant’s share of FICA taxes on deferred amounts and any other taxes which may be required or appropriate. If necessary, but only to the extent permitted under Code Section 409A, the Committee shall reduce the Annual Deferral Amount in order to comply with this Section 3.6.

3.7 Vesting . A Participant shall at all times be one hundred percent (100%) vested in his or her Deferral Account and Annual Deferral Amount.

ARTICLE 4

In-Service Distribution; Unforeseeable Financial Emergencies

4.1 In-Service Distribution . At the time of each election to defer an Annual Deferral Amount, the Committee may permit a Participant to elect to receive a future “In-Service Distribution” from the Plan with respect to that Annual Deferral Amount in a lump sum payment or pursuant to an Annual Installment Method over a period up to five years, as early as five years but no later than ten years, after the year of deferral (as described below), with the portion of the In-Service Distribution payment which is yet to be distributed being credited with interest as set forth in Section 3.5. The In-Service Distribution shall be an amount that is equal to the Annual Deferral Amount plus interest credited on such amount under Section 3.5. Subject to the other terms and provisions of this Plan, each In-Service Distribution elected shall be paid or commence as soon as practicable after January 1st of the first calendar year elected by the Participant that occurs at least five years and no more than ten years after the end of the Plan Year or latest Fiscal Year in the service period for which an Annual Deferral Amount would otherwise have been paid. Subject to compliance with Code Section 409A, the Committee may permit a Participant to change this election to commence distribution on an allowable alternative

Distribution Date by submitting a new Election Form to the Committee, provided that any such Election Form is submitted at least 12 months prior to the scheduled Distribution Date and is not effective for 12 months, and the commencement of the distribution with respect to which the election is made is deferred for a period of not less than five years from the Distribution Date such payment would otherwise have been made or commenced if payable in installments (unless payment is on account of death, Disability or Unforeseeable Financial Emergency). Notwithstanding the foregoing, but subject to compliance with Code Section 409A, should an event occur that triggers a benefit under Articles 5, 6 or 7, any Annual Deferral Amount, plus interest credited on such amount under Section 3.5, that is subject to an In-Service Distribution election under this Section 4.1 shall not be paid in accordance with this Section 4.1, but shall be paid in accordance with the other applicable Article of this Plan.

4.2 Withdrawal Payout/Suspensions for Unforeseeable Financial Emergencies . If the Participant experiences an Unforeseeable Financial Emergency, the Participant may petition the Committee to receive partial or full payout from the Plan. The payout shall not exceed the lesser of the Participant’s Account Balance, calculated as if such Participant were receiving a Termination Benefit, or the amount reasonably needed to satisfy the Unforeseeable Financial Emergency as determined under Section 1.36. Subject to the approval of the Committee in its sole and absolute discretion, and compliance with Code Section 409A, the payout shall be made in a lump sum no later than 60 days following the date of approval. In addition, if the Committee approves the payout, the Participant’s outstanding deferral election under the Plan shall be cancelled. The Committee may also permit a cancellation of a deferral election due to a hardship distribution from the Company’s 401(k) plan to the extent permitted under Section 409A. The Participant’s ability to make a deferral election following a cancellation of a deferral election under this Section 4.2 shall be subject to the provisions governing initial deferral elections under Section 3.2.

ARTICLE 5

Termination Benefit

5.1 Termination Benefits . Upon a Participant’s Separation from Service, the Participant shall receive a Termination Benefit equal to the Participant’s Account Balance, credited with interest in accordance with Section 3.5.

5.2 Payment of Termination Benefit . The Termination Benefit shall be paid in accordance with the installment payment method previously elected by the Participant in accordance with Section 3.3 or, if no election of an installment method was timely made, in a lump sum, with the portion of such Termination Benefit yet to be distributed being credited with interest in accordance with Section 3.5. The lump sum payment shall be made, or installment payments shall commence, no later than 60 days after the Participant’s Separation from Service; provided, however, that if a Participant changes the payment method for the Termination Benefit in accordance with Section 3.3, the payment date shall be determined in accordance with Section 3.3. Despite the foregoing, if the Participant’s Account Balance at the time of his or her Separation from Service is less than $50,000, payment of the Termination Benefit will be made in a lump sum no later than 60 days after Separation from Service, provided that such distribution may be made without violating Section 409A of the Code. In addition,

notwithstanding anything in the Plan to the contrary and to the extent required under Section 409A, the distribution of a Termination Benefit to a Participant who is a Key Employee shall not be made or commenced before the date which is six months and one day after the Participant’s Separation from Service (or, if earlier, the Participant’s death) if any stock of the Company (or any affiliate of the Company which would be treated as a “single employer” with the Company for purposes of Section 409A of the Code) is publicly traded on an established securities market or otherwise at such time. If a delay in the commencement of installment payments is required under the preceding sentence, the suspended installments shall be paid on the first business day following the expiration of the six-month period.

ARTICLE 6

Death Benefit

6.1 Death Prior to Distribution of Account Balance . If a Participant dies before or after Separation from Service, the Participant’s unpaid Account Balance shall be paid to the Participant’s Beneficiary in a lump sum no later than 90 days following the date of death. The Committee may require suitable proof of death as a condition of payment.

ARTICLE 7

Disability

7.1 General . If the Committee determines that the Participant has incurred a Disability, the Participant’s outstanding deferral elections shall be cancelled and the Participant’s unpaid Account Balance shall be paid to the Participant or the Participant’s legal representative in a lump sum no later than 60 days after the date of Disability. If the Participant returns to employment or service as a director with an Employer after a Disability ceases, the Participant’s ability to make a deferral election following a cancellation of a deferral election under this Section 7.1 shall be subject to the provisions governing initial deferral elections under Section 3.2.

ARTICLE 8

Beneficiary Designation

8.1 Beneficiary . Each Participant shall have the right, at any time, to designate his or her Beneficiary (both primary as well as contingent) to receive any benefits payable under the Plan to a Beneficiary upon the death of a Participant. The Beneficiary designated under this Plan may be the same as or different from the Beneficiary designation under any other plan of an Employer in which the Participant participates.

8.2 Beneficiary Designation; Change; Spousal Consent . A Participant shall designate his or her Beneficiary by completing and signing the Beneficiary Designation Form, and returning it to the Committee. A Participant shall have the right to change a Beneficiary by completing, signing, and otherwise complying with the terms of the Beneficiary Designation Form and the Committee’s rules and procedures, as in effect from time to time. Where required

by law or by the Committee, in its sole and absolute discretion, if the Participant names someone other than his or her spouse as a Beneficiary, a spousal consent, in the form designated by the Committee, must be signed by that Participant’s spouse and returned to the committee. Upon the acceptance by the Committee of a new Beneficiary Designation Form, all Beneficiary designation previously filed shall be canceled. The Committee shall be entitled to rely on the last Beneficiary Designation Form filed by the Participant and accepted by the Committee prior to his or her death.

8.3 Acknowledgement . No designation or change in designation of a Beneficiary shall be effective until received, accepted and acknowledged in writing by the Committee.

8.4 No Beneficiary Designation . If a Participant fails to designate a Beneficiary as provided in this Article 8 or if all designated Beneficiaries predecease the Participant or die prior to complete distribution of the Participant’s benefits, then the Participant’s designated Beneficiary shall be his or her surviving spouse. If the Participant has no surviving spouse, the benefits remaining under the Plan shall be paid to the Participant’s issue upon the principle of representation and if there is no such issue, to the Participant’s estate.

8.5 Doubt as to Beneficiary . If the Committee has any doubt as to the proper Beneficiary to receive payments pursuant to this Plan, the Committee shall have the right, exercisable in its sole and absolute discretion, to cause the Participant’s Employer to withhold such payments until this matter is resolved to the Committee’s satisfaction.

8.6 Discharge of Obligations . The payment of benefits under the Plan to a Beneficiary shall fully and completely discharge all Employers and the Committee from all further obligations under this Plan with respect to the Participant, and that Participant’s Plan Agreement shall terminate upon such full payment of benefits.

ARTICLE 9

Termination, Amendment, or Modification

9.1 Termination . Any Employer reserves the right to terminate the Plan at any time with respect to Participants employed by or in service with the Employer. No distributions shall be made prior to the date or dates otherwise provided under the Plan unless earlier distribution is permitted under Code Section 409A. The Company shall have discretion to terminate the Plan and make distributions upon termination to the maximum extent permitted under Code Section 409A.

9.2 Amendment . Any Employer may, at any time, amend or modify the Plan in whole or in part with respect to that Employer; provided, however, that no amendment or modification shall be effective to decrease a Participant’s Account Balance at the time of such amendment. Notwithstanding the foregoing, the Employer may amend the Plan at any time to comply with the provisions of Code Section 409A with respect to any benefits or payments under the Plan.

9.3 Effect of Payment . The full payment of the applicable benefit under the Plan shall completely discharge all obligations to a Participant under this Plan and the Participant’s Plan Agreement shall terminate.

ARTICLE 10

Administration

10.1 Committee Duties . This Plan shall be administered by a Committee, to be known as the Cubic Corporation Deferred Compensation Plan Committee, which shall consist of individuals approved by the Board, or, after the occurrence of a Change in Control, a third party who, before the occurrence of such Change in Control, was appointed by the then CEO to act as the Plan Administrator in the event of a Change in Control, and accepted such appointment. Members of the Committee may be Participants under this Plan. The Committee shall also have the discretion and authority to make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Plan and decide on resolve any and all questions, including but not limited to, interpretations of this Plan and entitlement to or amount of benefits under this Plan, as may arise in connection with the Plan. Any Committee member must recuse himself or herself on any matter of personal interest to such member that comes before the Committee.

10.2 Agents . In the administration of this Plan, the Committee may, from time to time, and at the expense of the Company, employ agents and delegate to them such administrative duties as it sees fit and may from time to time consult with counsel who may be counsel to any Employer. Any communications, including, without limitation, designations, writings, notices, and elections, required to be provided to, or filed with, the Committee shall include provision to, or filing with, any person or entity designated by the Committee to be such an agent. If the Committee employs an agent, any applicable reference to the Committee in the Plan shall be construed as a reference to the agent to whom the Committee has delegated a particular administrative duty.

10.3 Binding Effect of Decisions . The decision or action of the Committee with respect to any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Plan.

10.4 Indemnity of Committee . All Employers shall indemnify and hold harmless the members of the Committee against any and all claims, losses, damages, expenses, or liabilities, including attorneys’ fees, arising from any action or failure to act with respect to this Plan, except in the case of gross negligence or willful misconduct by the Committee or any of its members.

10.5 Employer Information . To enable the Committee to perform its functions, each Employer shall supply full and timely information to the Committee on all matters relating to the compensation of its Participants, the date and circumstances of the Disability, death or Separation from Service of its Participants, and such other pertinent information as the Committee may reasonably require.

10.6 Electronic Administration . The Plan may be administered by use of electronic methods, but only to the extent permitted by law. It is specifically contemplated that, where the Plan refers to communications, including, without limitation, designations, writings, notices, and elections, these communications may occur electronically, pursuant to such procedures as the Committee may establish.

ARTICLE 11

Claims Procedure

11.1 Presentation of Claim . Any Participant or Beneficiary of a deceased Participant (such Participant or Beneficiary being referred to below as a “Claimant”) may deliver to the Committee a written claim for a determination with respect to the amounts distributable to such Claimant from the Plan. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within 60 days after such notice was received by the Claimant. The claim must state with particularity the determination desired by the Claimant. All other claims must be made within 180 days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the Claimant.

11.2 Notification of Decision . If the claim is approved, prompt written notice to the Claimant shall be given.

In the event a Claimant’s claim for benefits is denied in whole or in part, the Committee shall notify the Claimant of such denial in writing and shall advise the Claimant of the right to a review thereof. Such written notice shall set forth, in a manner calculated to be understood by the Claimant,

(a) specific reasons for the denial,

(b) specific references to the Plan provisions on which the denial is based,

(c) a description of any information or material necessary for the applicant to perfect the application, including an explanation of why such material is necessary, and

(d) an explanation of the Plan’s claims review procedure, the time limits applicable under the procedures and a statement regarding the claimant’s right to bring a civil action under section 502(a) of ERISA following an adverse benefit determination on appeal.

Such written notice shall be given to the applicant within 90 days after the Committee receives the application, unless special circumstances require an extension of time of up to an additional 90 days for processing the application. If such an extension of time for processing is required, written notice of the extension shall be furnished to the applicant prior to the termination of the initial 90-day period. This notice of extension shall indicate the special circumstances requiring the extension of time and the date by which the Committee expects to render its decision on the application for benefits.

11.3 Requests for a Review of a Denied Claim . Any person whose claim is denied in whole or in part, or such person’s authorized representative, may appeal from such denial by submitting to the Committee a request for a review of the application within 60 days after receiving written notice of such denial from the Committee. The request for a review shall be in writing and shall set forth all of the grounds on which it is based, all facts and documents in support of the request and any other matters which the applicant deems pertinent. The Committee may require the applicant to submit such additional facts, documents or other material as it may deem necessary or appropriate in making its review. The Claimant may submit written comments, documents, records and other information related to the benefit claim on appeal. The Claimant must be provided, upon request and free of charge, reasonable access to and copies of all documents, records and other information relevant to the claim. A document is considered relevant to the claim if it (i) was relied upon in making the determination on the claim; (ii) was submitted, considered or generated in the course of making the determination, without regard as to whether it was relied upon in making the decision; or (iii) demonstrates compliance in making the decision on the claim with the requirement that the determination must follow the terms of the Plan and be consistent when applied to similarly situated claimants.

11.4 Decision on Review . The Committee on appeal must undertake a full and fair review of the claim and consider all comments, documents, records and other information submitted by the Claimant, without regard to whether such information was submitted or considered in the initial claim determination. The Committee shall render its decision on review promptly, and not later than 60 days after the filing of a written request for review of the denial, unless a hearing is held or other special circumstances require an extension of time of up to an additional 60 days for processing the request. If such an extension is required, written notice of the extension shall be furnished to the applicant prior to the end of the initial 60-day period. This notice of extension shall indicate the special circumstances requiring the extension of time and the date by which the Committee expects to render its decision on the application for benefits. If an extension of time is required due to the claimant’s failure to submit information necessary to review the claim, the period of time that the Committee has to review the claim will be tolled from the date on which the notice of extension is sent to the claimant until the date on which the claimant responds to the request for additional information.

Within the time prescribed above, the Committee shall give written notice of its decision to the Claimant and the Company. In the event that the Committee confirms the denial of the claim in whole or in part, such notice shall set forth, in a manner calculated to be understood by the Claimant:

(a) specific reasons for the denial;

(b) specific reference(s) to the pertinent Plan provisions upon which the decision was based;

(c) a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to and copies of all documents, records and other information relevant to the benefit claim. A document is considered relevant to the claim if it (i) was relied upon in making the benefit determination; (ii) was submitted, considered or generated in the course of making the benefit determination, without regard as to whether it was relied upon in making the

decision; or (iii) demonstrates compliance in making the benefit decision with the requirement that the benefit determination must follow the terms of the Plan and be consistent when applied to similarly situated claimants, and

(d) a description of any voluntary appeal procedures offered under the Plan, the claimant’s right to obtain information about such procedures and a statement regarding the claimant’s right to bring a civil action under section 502(a) of ERISA following an adverse benefit determination on appeal.

If the Committee is a committee or board that holds regularly scheduled meetings at least quarterly, the determination on appeal must be made no later than the date of the meeting that immediately follows the Plan’s receipt of the appeal request. However, if the appeal is received within 30 days before the date of the meeting, the determination must be made by the date of the second meeting that immediately follows the Plan’s receipt of the appeal request. If an extension of the time period for processing the claim is needed, the determination must be made by the date of the third meeting following the Plan’s receipt of the appeal request. If such an extension for review is required, written notice of the extension shall be furnished to the applicant before the commencement of the extension. This notice of extension shall indicate the special circumstances requiring the extension of time and the date by which the Committee expects to render its decision on the claim. The Committee must provide the notice of determination on appeal to the Claimant as soon as possible, but no later than 5 days after the determination is made.

In the event that the Committee determines that the claim should not have been denied in whole or in part, the Company shall take appropriate remedial action as soon as reasonably practicable after receiving notice of the Committee’s decision.

11.5 Rules and Procedures . The Committee may establish such rules and procedures, consistent with the Plan and with ERISA, as it may deem necessary or appropriate in carrying out its responsibilities under this Article 11. The Committee may require a Claimant who wishes to submit additional information in connection with an appeal from the denial of a claim in whole or in part to do so at the Claimant’s own expense.

11.6 Exhaustion of Remedies . No legal action for benefits under the Plan shall be brought unless and until the Claimant (i) has submitted a written claim for benefits in accordance with Section 11.1; (ii) has been notified by the Committee that the application is denied; (iii) has filed a written request for a review of the application in accordance with Section 11.3; and (iv) has been notified in writing that the Committee has affirmed the denial of the claim. However, an action may not be brought by the Claimant under Section 502(a) of ERISA if the Claimant fails to bring such claim within the period prescribed by law, or to the extent the Claimant has agreed to binding arbitration, as provided in Section 11.7.

11.7 Optional Arbitration . Any claim or controversy between the parties arising out of, connected with, or related to the formation, interpretation, performance, or breach of any provision of this Plan shall, at the option of the Claimant, be submitted to and resolved exclusively by expedited arbitration by a single arbitrator in accordance with the following procedures:

(a) In the event of a claim or controversy subject to this arbitration provision, the complaining party shall promptly send written notice to the other party identifying the matter in dispute and the proposed remedy. Following the giving of such notice, the parties shall meet and attempt in good faith to resolve the matter. In the event the parties are unable to resolve the matter within 21 days, the parties shall meet and attempt in good faith to select a single arbitrator acceptable to both parties. If a single arbitrator is selected, the arbitrator shall proceed in accordance with the Rules of the American Arbitration Association (“AAA”) for Employment Disputes. If a single arbitrator is not selected by mutual consent within 31 days following the giving of the written notice of dispute, either party may file a Demand for Arbitration with the AAA pursuant to its Rules for Employment Disputes.

(b) Unless the parties agree otherwise, within 60 days of the selection of the arbitrator, a hearing shall be conducted before such arbitrator at a time and a place in San Diego County agreed upon by the parties. In the event the parties are unable to agree upon the time or place of the arbitration, the time and place within San Diego County shall be designated by the arbitrator after consultation with the parties. Within 30 days of the conclusion of the arbitration hearing, the arbitrator shall issue an award, accompanied by a reasoned written decision explaining the basis for the arbitrator’s award.

(c) In any arbitration hereunder, the Company shall pay all administrative fees of the arbitration and all fees of the arbitrator, except that the Participant or Beneficiary may, if he wishes, pay up to one-half of those amounts. Each party shall pay its own attorneys’ fees, costs, and expenses, unless the arbitrator orders otherwise. The prevailing party in such arbitration, as determined by the arbitrator, and in any enforcement or other court proceedings, shall be entitled, to the extent permitted by law, to reimbursement from the other party for all of the prevailing party’s costs (including but not limited to the arbitrator’s compensation), expenses, and attorneys’ fees. The arbitrator shall have no authority to add to or to modify this Plan, shall apply all applicable law, and shall have no lesser and no greater remedial authority than would a court of law resolving the same claim or controversy. The arbitrator shall, upon an appropriate motion, dismiss any claim without an evidentiary hearing if the party bringing the motion establishes that it would be entitled to summary judgment if the matter had been pursued in court litigation. The parties shall be entitled to reasonable discovery subject to the discretion of the arbitrator.

(d) The decision of the arbitrator shall be final, binding, and non-appealable, and may be enforced as a final judgment in any court of competent jurisdiction.

(e) This arbitration provision of the Plan shall extend to claims against any parent, subsidiary, or affiliate of each party, and, when acting within such capacity, any officer, director, shareholder, Participant, Beneficiary, or agent of each party, or of any of the above, and shall apply as well to claims arising out of state and federal statutes and local ordinances as well as to claims arising under the common law or under this Plan.

(f) Notwithstanding the foregoing, and unless otherwise agreed between the parties, either party may, in an appropriate matter, apply to a court for provisional relief, including a temporary restraining order or preliminary injunction, on the ground that the arbitration award to which the applicant may be entitled may be rendered ineffectual without provisional relief.

(g) Any arbitration hereunder shall be conducted in accordance with the employment rules and procedures of the AAA then in effect; provided, however, that, in the event of any inconsistency between the rules and procedures of the AAA and the terms of this Plan, the terms of this Plan shall prevail.

(h) If any of the provisions of this Section 11.7 are determined to be unlawful or otherwise unenforceable, in whole or in part, such determination shall not affect the validity of the remainder of this Section 11.7, and this Section 11.7 shall be reformed to the extent necessary to carry out its provisions to the greatest extent possible and to insure that the resolution of all conflicts between the parties, including those arising out of statutory claims, shall be resolved by neutral, binding arbitration. If a court should find that the provisions of this Section 11.7 are not absolutely binding, then the parties intend any arbitration decision and award to be fully admissible in evidence in any subsequent action, given great weight by any finder of fact, and treated as determinative to the maximum extent permitted by law.

ARTICLE 12

Miscellaneous

12.1 Unsecured General Creditor . Participants and their Beneficiaries, heirs, successors, and assigns shall have no legal or equitable right, interest or claim in any property or assets of an Employer. Any and all of an Employer’s assets shall be, and remain, the general, un-pledged, and unrestricted assets of the Employer. An Employer’s obligation under the Plan shall be merely that of an unfunded and unsecured promise to pay money in the future and the sole interest of a Participant and a Participant’s beneficiaries shall be as a general creditor of the Company and any Employer.

12.2 Employer’s Liability . An Employer’s liability for the payment of benefits shall be defined only by the Plan. An Employer shall have no obligation to a Participant under the Plan except as expressly provided in the Plan.

12.3 Non-Assignability . Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage, or otherwise encumber, transfer, hypothecate, or convey in advance of actual receipt, the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are expressly declared to be un-assignable and non-transferable. No part of the amounts payable shall, prior to actual payments be subject to seizure or sequestration for the payment of any debts, judgments, alimony, or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant’s or any other person’s bankruptcy or insolvency.

12.4 Coordination with Other Benefits . The benefits provided for a Participant and Participant’s Beneficiary under the Plan are in addition to any other benefits available to such Participant under any other plan or program for employees of the Participant’s Employer. The Plan shall supplement and shall not supersede, modify, or amend any other such plan or program except as may otherwise be expressly provided.

12.5 Not a Contract of Employment . The terms and conditions of this Plan shall not be deemed to constitute a contract of employment between any Employer and the Participant. Such employment is hereby acknowledged to be an “at will” employment relationship that can be terminated at any time for any reason, with or without cause, unless expressly provided in a written employment agreement. Nothing in this Plan shall be deemed to give a Participant the right to be retained in the service of any Employer, either as an employee or a director, or to interfere with the right of any Employer to discipline or discharge the Participant at any time.

12.6 Furnishing Information . A Participant or his or her Beneficiary will cooperate with the Committee by furnishing any and all information requested by the Committee and take such other actions as may be requested in order to facilitate the administration of the Plan and the payments of benefits hereunder, including but not limited to taking such physical examinations as the Committee may deem necessary.

12.7 Terms . Whenever any words are used herein in the singular or in the plural, they shall be construed as though they were used in the plural or the singular, as the case may be, in all cases where they would so apply. The masculine pronoun shall be deemed to include the feminine and vice versa, unless the context clearly indicates otherwise.

12.8 Captions . The captions of the articles, sections, and paragraphs of this Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions.

12.9 Governing Law . Subject to ERISA, the provisions of this Plan shall be construed and interpreted according to the laws of the State of California.

12.10 Notice . Any notice or filing required or permitted to be given to the Committee under this Plan shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail to:

CUBIC CORPORATION
9333 BALBOA AVENUE
SAN DIEGO, CA 92123
ATTN: VICE PRESIDENT, HUMAN RESOURCES

Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification.

Any notice or filing required or permitted to be given to a Participant under this Plan shall be sufficient if in writing and hand-delivered, or sent by First Class United States mail, to the last known address of the Participant.

12.11 Successors . The provisions of this Plan shall bind and inure to the benefit of the Participant’s Employer and its successors and assigns and the Participant, the Participant’s Beneficiaries, and their permitted successors and assigns.

12.12 Spouse’s Interest . A Participant’s Beneficiary designation shall be deemed automatically revoked if the Participant names a spouse as Beneficiary and the marriage is later dissolved or the spouse dies. Without limiting the generality of the foregoing, the interest in the benefits hereunder of a spouse of a Participant who has predeceased the Participant or whose marriage with the Participant has been dissolved shall automatically pass to the Participant and shall not be transferable by such spouse in any manner, including but not limited to such spouse’s will, nor shall such interest pass under the laws of intestate succession.

12.13 Validity . In case any provision of this Plan shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal or invalid provision had never been inserted herein.

12.14 Incompetent . If the Committee determines in its discretion that a benefit under this Plan is to be paid to a minor, a person declared incompetent or to a person incapable of handling the disposition of that person’s property, the Committee may direct payment of such benefit to the guardian, legal representative, or person having the care and custody of such minor, incompetent, or incapable person. The Committee may require proof of minority, in competency, incapacity, or guardianship, as it may deem appropriate prior to distribution of the benefit. Any payment of a benefit shall be a payment for the account of the Participant and the Participant’s Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Plan for such payment amount.

12.15 Court Order . The Committee is authorized to make any payments as may be necessary to fulfill a domestic relations order (as defined in Section 414(p)(1)(B) of the Code) in any action in which the Plan or Committee has been named as a party.

12.16 Effect on Employee Benefits . Amounts deferred under this Plan or distributed to the terms of this Plan are not taken into account in the calculation of an Employee’s benefits under any employee pension or welfare benefit program or under any other compensation practice maintained by the Company, except to the extent provided in such program or practice.

12.17 Legal Fees to Enforce Rights Upon a Change in Control . The Company is aware that upon the occurrence of a Change in Control, the Board (which might then be composed of new members) or a shareholder of the Company, or of any successor corporation might then cause or attempt to cause the Company or such successor to refuse to comply with its obligations under the Plan and might cause or attempt to cause the Company to institute, or may institute, litigation seeking to deny Participant’s the benefits intended under the Plan. In these circumstances, the purpose of the Plan could be frustrated. Accordingly, if, following a Change in Control, it should appear to any Participant that the Company or any successor has failed to comply with the provisions of the Plan or any other person takes any action to declare the Plan void or unenforceable or institutes any litigation or other legal action designed to deny, diminish or to recover from any Participant the benefits intended to be provided, then the Company irrevocably authorizes such Participant to retain legal counsel at the Company’s expense in connection with the initiation or defense of any litigation or other legal action, whether by or against the Company or any director, officer, shareholder or other person affiliated with the Company or any successor thereto in any jurisdiction.

12.18 Code Section 409A . Notwithstanding any provision of the Plan to the contrary, no distributions shall be made under the Plan earlier than permitted under the requirements of Code Section 409A, and no elections to defer Compensation, or to change the time or form of distribution, shall be permitted unless in accordance with the requirements of Code Section 409A.

IN WITNESS WHEREOF, the Company has signed this amended and restated Plan Document as of January 1, 2013.

	CUBIC CORPORATION,

	a Delaware corporation

	By:

	Title:

APPENDIX A

LIMITED TRANSITION RELIEF FOR DISTRIBUTION ELECTIONS MADE AVAILABLE IN ACCORDANCE WITH NOTICES 2006-79, 2007-86 AND SUBSEQUENT GUIDANCE

The capitalized terms below shall have the same meaning as provided in Article 1 of the Plan.

Opportunity to Make New (or Revise Existing) Distribution Elections .

Notwithstanding the required deadlines for the submission of distribution elections under the Plan, the Committee may, to the extent permitted by Notice 2006-79, provide a limited period in which Participants may make new distribution elections, or revise existing distribution elections, with respect to amounts subject to the terms of the Plan, by submitting an Election Form on or before the deadline established by the Committee, which for amounts that would otherwise be paid to the Participant in 2008 shall in no event be later than December 31, 2007. If any distribution election submitted by a Participant in accordance with this paragraph either (a) relates to an amount that would otherwise be paid to the Participant in 2007, or (b) would cause an amount to be paid to the Participant in 2007, such election shall not be effective.

In addition, notwithstanding the required deadlines for the submission of distribution elections under the Plan, the Committee may, to the extent permitted by Notice 2007-86, provide a limited period in which Participants may make new distribution elections, or revise existing distribution elections, with respect to amounts subject to the terms of the Plan, by submitting an Election Form on or before the deadline established by the Committee, which for amounts that would otherwise be paid to the Participant after 2008 shall in no event be later than December 31, 2008. If any distribution election submitted by a Participant in accordance with this paragraph either (a) relates to an amount that would otherwise be paid to the Participant in 2008, or (b) would cause an amount to be paid to the Participant in 2008, such election shall not be effective.

Any distribution election(s) made by a Participant, and accepted by the Committee, in accordance with this Appendix A shall not be treated as a change in either the form or timing of a Participant’s benefit payment for purposes of Code Section 409A or the Plan.

The Committee may provide further transition relief for new distribution elections and changes in existing distribution elections with respect to amounts subject to the terms of the Plan to the extent permitted in future Treasury Department or Internal Revenue Service guidance.

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, William W. Boyle, certify that:

1) I have reviewed this quarterly report on Form 10-Q of Cubic Corporation;

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ William W. Boyle
William W. Boyle
Chief Executive Officer


Date: February 11, 2013

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, John D. Thomas, certify that:

1) I have reviewed this quarterly report on Form 10-Q of Cubic Corporation;

5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ John D. Thomas
John D. Thomas
Executive Vice President and Chief Financial Officer

Date: February 11, 2013

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

The undersigned, in his capacity as an officer of Cubic Corporation (the “Registrant”) hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to such officer’s knowledge:

(1) The quarterly report of the Registrant on Form 10-Q for the period ended December 31, 2012, (the “Report”), which accompanies this certification, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

	/s/ William W. Boyle
	William W. Boyle
	Chief Executive Officer


	Date: February 11, 2013

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

	/s/ John D. Thomas
	John D. Thomas
	Executive Vice President and Chief Financial Officer


	Date: February 11, 2013